## 1codea2021002

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### Executive summary
- Staff proposes a three year-arrangement under the ECF with access equivalent to 100 percent of DRC’s quota (SDR 1,066.0 million) with semi-annual reviews.
- Purposes of the ECF arrangement:
  - Meet protracted balance of payment needs.
  - Support the authorities’ medium-term reform program aimed at maintaining macroeconomic stability, including by strengthening international reserves.
  - Increase fiscal space for infrastructure and social spending while maintaining a moderate risk of debt distress.
  - Promote sustainable and private sector-led economic growth.
  - Help catalyze budget support from external partners.
- Assessment: Risk of debt distress remains moderate; capacity to repay to the Fund is adequate.
- Key program priorities:
  - Stepping up domestic revenue mobilization.
  - Strengthening governance including natural resource management and transparency.
  - Strengthening the monetary policy framework and the central bank’s independence.
- Contingency planning: Authorities have formulated contingency plans that protect priority social spending in a highly uncertain environment.

### Recent developments and near-term outlook
- COVID-19 and health context:
  - Confirmed cases: 40,254; deaths: 916 (as of late June 2021).
  - Vaccination: first shipment of 1.7 million doses arrived in early March 2021; first-stage goal to cover 20 percent of the population.
- Macroeconomic outcomes 2020:
  - Real GDP growth: 1.7 percent (preliminary).
  - Extractive GDP expansion: 9.7 percent.
  - Non-extractive GDP contraction: -1.3 percent.
  - Overall fiscal deficit: 2.1 percent of GDP in 2020 (revised from 0.6 percent).
  - BCC advances to government through end-April 2020: about 0.3 percent of GDP (equivalent to US$160 million).
  - Inflation: 4.6 percent in 2019 → 15.7 percent year-on-year in August 2020 → 4.8 percent in April 2021.
  - Official FX reserves: US$730 million at end-2019 to about US$709 million at end-2020.
- Near-term outlook:
  - GDP growth expected to slowly recover from 2021 onwards driven by mining sector (Kamoa-Kakula: projected maximum capacity 800 kilotonnes per year; Phase 1 began May 2021; initial capital costs US$1-1.2 billion; Phase 2 expected 2022Q3 with more than US$1.1 billion planned).
  - Baseline 2021 GDP growth forecast: 4.9 percent.
  - Risks: Downside — protracted pandemic, slower recovery, political instability; Upside — quicker resumption of investment, improved relations, booming mining exports.

### Fiscal policy, revenue mobilization, and public financial management
- Fiscal anchor and targets:
  - Fiscal anchor: no central bank financing to government and maintaining a moderate risk of debt distress.
  - Absent additional grants/financing, domestic fiscal deficits of up to 0.5 percent of GDP linked to net issuance of Treasury bills (including introduction of dollar-indexed T-bills in 2021Q2).
  - ECF target: increase the revenue to GDP ratio by 3.5 percentage points by 2023 (2.1 percentage points above the 2019 level).
- Revenue context:
  - Central government revenue to GDP averaged 9.9 percent over last five years; SSA average: 17.3 percent.
  - Revenue and grants (Billions of CDF): 9,000 (2019 Prel.), 11,409 (2020 SMP year), 8,820 (2021 prel.).
  - Revenue (Billions of CDF): 8,361 (2019), 10,189 (2020), 7,889 (2021 prel.).
- Four axes of revenue mobilization:
  - Restoring VAT normal functioning:
    - VAT collections fell by half from 4.4 percent of GDP between 2015 and 2019.
    - Self-liquidating VAT introduced March 2021 for imports from mining companies.
    - IGF audit of VAT arrears to mining companies by December 2021.
  - Rationalizing non-tax and parafiscal charges:
    - Consolidate legal provisions by SB, September 2021.
    - Adopt rationalization plan by March 2022; rationalization of parafiscal charges by December 2022.
  - Streamlining tax expenditures:
    - Tax expenditures about 22 percent of central government revenue as of 2017.
    - Authorities to estimate and publish tax expenditures yearly and finalize rationalization plan by end-2021.
  - Modernizing revenue administration:
    - Continue computerization: ISYS-Régies, data warehouse, LOGIRAD.
    - Customs to implement ASYCUDA World at additional 10 offices (SB, December 2021).
- Spending composition and discipline:
  - Domestically financed investment to increase from 0.3 percent of GDP in 2020 to over 2.5 percent of GDP in 2023.
  - With free education initiative, wages represented about two thirds of current spending in 2020; authorities committed to rationalize the wage bill and non-priority expenditures.
  - Publish independent audit of stock of arrears with repayment plan included in 2022 budget law.
- PFM reforms (MEFP ¶27):
  - Reinforce budget credibility, enhance treasury management, consolidate government accounts into a single treasury account at the BCC, strengthen public procurement, publish an annual fiscal risks statement, and restore State accounting via creation of the DGTCP.

### Monetary and financial sector policies
- Monetary policy framework:
  - Monetary aggregate targets to remain main medium-term nominal anchor.
  - Adoption of new reserve requirement framework and MoU between BCC and Ministry of Finance to regularize outstanding government credit (SBs, December 2021).
  - Prior action: full constitution of the BCC board in accordance with the 2018 BCC Law required to enhance independence.
  - Discontinuation of advances and ban on new guarantees from the BCC to the private sector; plan for gradual elimination of existing operations.
- Reserves and external position:
  - Staff projects gross official FX reserves: US$1.3 billion by end-2021 or 3.4 weeks of imports; about 6 weeks of imports by end-2024.
  - Measures to strengthen reserves: ECF disbursements, new reserve requirement regulation, transfer abroad of BCC FX deposits at local commercial banks.
  - Repatriation requirement of 60 percent of export receipts is a capital flow management measure to be scaled back as pressures subside.
- Financial sector supervision:
  - Strengthen risk-based supervisory framework; submit new Commercial Banking Law to Parliament by end-November 2021 (SB).
  - Financial Sector Stability Review (FSSR) planned for end-2021.
  - Some banks recorded shortfalls in required reserves due to dollarization and scarce local currency; return to positive excess reserves expected as local currency supply increases.
- Financial soundness indicators (selected):
  - Regulatory capital to risk-weighted assets: 14.0 (Mar-21).
  - NPLs to gross loans: 19.0 (Mar-21).
  - Deposits/Loans (liquidity): 226.0 (Mar-21).
  - Foreign currency-denominated loans to total loans: 88.9 (Mar-21).

### Governance, transparency, and mining sector reforms
- Transparency progress:
  - Publication of mining contracts: 146 of 162 contracts published; continuous publication of all new contracts (continuous SB).
  - Government adopted EITI roadmap on mining transparency in early June (prior action).
  - Publish full 2020 financial statements of GECAMINES (SB, August 2021).
- Anti-corruption and legal reforms:
  - Strengthen Anti-Corruption Prevention Agency (APLC operational since July 2020).
  - Amend AML/CFT Law (including banning anonymous bank accounts) and asset declaration framework to strengthen PEP measures by end-October 2021.
  - Commit to endow Court of Auditors and IGF with independence, resources, and powers.
- Procurement and COVID spending transparency:
  - Identified COVID-19-related spending: US$52 million (detailed table: Total 95.8 CF billion / 51.7 US$ million).
  - By June 23, 2021 authorities published 32 of 35 COVID-related contracts totaling US$6.8 million (supplement notes 32/35 published; supplement July 6, 2021: publication 12.8 CF billion / 6.9 US$ million).
  - Commitment to publish beneficial ownership for contracts above US$1 million (outstanding implementation).

### Debt, financing, and capacity to repay
- Debt assessment:
  - Total Public Debt (2020, Nominal in millions of US$): 10,237 — 21.0 percent of GDP.
  - Total External Debt: 6,579 — 13.5 percent of GDP.
  - Total Domestic Debt: 3,658 — 7.5 percent of GDP.
  - External arrears: US$282 million.
- DSA findings:
  - Risk of external debt distress: Moderate.
  - Overall risk of debt distress: Moderate.
  - DRC Composite Indicator (CI) score: 2.03 — weak debt-carrying capacity.
  - Most external debt thresholds breached under stress tests; prioritize concessional borrowing and strengthen debt management.
- Capacity to repay the Fund:
  - Total obligations (millions of SDRs): 32.0 (2020), 9.9 (2021), 0.3 (2022), 0.3 (2023), 0.3 (2024), 80.2 (2025), 106.9 (2026), 183.0 (2027), 243.9 (2028), 304.8 (2029).
  - Fund credit outstanding (end-period, millions of SDRs): 542.9 (2020), 837.6 (2021), 1,142.2 (2022), 1,446.8 (2023), 1,599.1 (2024), 1,519.1 (2025), 1,412.5 (2026), 1,229.8 (2027).
  - Fund credit outstanding (end-period, millions of U.S. dollars): 780.8 (2020), 1,215.8 (2021), 1,669.0 (2022), 2,122.3 (2023), 2,353.1 (2024), 2,241.9 (2025), 2,090.8 (2026), 1,820.3 (2027), 1,459.7 (2028).
  - Fund credit outstanding projected to remain close to 100 percent of gross international reserves throughout the program; total obligations to Fund peak in 2029 at 10.6 percent of gross international reserves (0.5 percent of GDP).

### IMF program modalities, financing, and monitoring
- ECF arrangement:
  - Access: SDR1,066.0 million (100 percent of quota), disbursed evenly over program period (7 equally distributed disbursements).
  - Proposed schedule (Table of reviews/purchases): SDR 152.3 million per purchase on specified dates from July 15, 2021 through March 15, 2024 (seven purchases totaling SDR 1,066.0 million).
- Program monitoring:
  - Semi-annual reviews with QPCs (end of Q2 and Q4) and ITs (end of Q1 and Q3).
  - QPCs include: net international reserves of the BCC; net credit of the BCC to the central government; net domestic assets of the BCC; domestic balance on a cash basis; contracting/guaranteeing new non-concessional external debt by the central government; external payment arrears.
  - Monetary QPCs to be validated by an external auditor; BCC to use a monitored account at the BIS for Fund disbursements with validation of transactions by external auditors.
- Financing assurances and gaps:
  - Projected clearance of current stock of external arrears of US$282 million over a 5-year period (see DSA).
  - Disbursements of exceptional financing by other partners expected to total US$357 million in 2021, with additional amounts in subsequent years; exceptional financing from sources other than the IMF accounts for about 58 percent of the external financing gap over the program period.
- Selected BOP and financing figures (Text Table 3 highlights):
  - Current Account: -1,136 Million USD (-2.1 percent of GDP) in 2021; -1,088 Million USD (-1.8 percent of GDP) in 2022; -975 Million USD (-1.5 percent of GDP) in 2023; -927 Million USD (-1.3 percent of GDP) in 2024.
  - Change in Gross Reserves (C): 635 Million USD (1.2 percent of GDP) in 2021; 578 Million USD (1.0 percent of GDP) in 2022; 475 Million USD (0.7 percent of GDP) in 2023; 381 Million USD (0.5 percent of GDP) in 2024.
  - Overall Financing Needs (D=A-B-C): -798 Million USD (-1.5 percent of GDP) in 2021; -1,074 Million USD (-1.8 percent of GDP) in 2022; -1,091 Million USD (-1.7 percent of GDP) in 2023; -724 Million USD (-1.0 percent of GDP) in 2024.
  - IMF Disbursements (Memorandum): 441 Million USD (0.8 percent of GDP) in 2021; 440 Million USD (0.7 percent of GDP) in 2022; 446 Million USD (0.7 percent of GDP) in 2023; 224 Million USD (0.3 percent of GDP) in 2024.
  - Gross reserves (Memorandum items): 1,344 (2021); 1,922 (2022); 2,397 (2023); 2,779 (2024) — in millions of US$.

### Risks, scenarios, and contingency planning
- Risk assessment:
  - Main vulnerabilities: low FX reserves, state fragility, high exposure to commodity-price shocks, weak revenue mobilization, contingent liabilities from SOEs and guarantees.
  - Political instability and weak institutional governance can undermine TA implementation and ownership.
- Contingency measures:
  - Adverse scenario: reduce lower priority spending within goods and services and domestically financed capital expenditures, while preserving social spending.
  - Favorable scenario: higher mineral prices and positive reforms could increase revenues; authorities may consider additional priority spending while respecting fiscal and debt sustainability objectives.
  - Authorities agreed to discuss use of upcoming SDR allocation during the first ECF review (MEFP, ¶19).

### Key macroeconomic projections (selected exact figures)
- Real GDP (annual change): 4.4 (2019), 3.2 (2020), 1.7 (2021 Prel. SMP), 4.9 (2022), 5.6 (2023), 6.6 (2024), 6.8 (2025), 6.7 (2026)
- Extractive GDP (annual change): 1.0 (2019), -2.4 (2020), 9.7 (2021 Prel. SMP), 11.0 (2022), 7.9 (2023), 7.5 (2024), 5.4 (2025), 5.4 (2026)
- Non-Extractive GDP (annual change): 5.8 (2019), 5.4 (2020), -1.3 (2021 Prel. SMP), 2.2 (2022), 4.5 (2023), 6.2 (2024), 7.5 (2025), 7.3 (2026)
- Consumer prices, period average: 4.7 (2019), 5.0 (2020), 11.4 (2021 Prel. SMP), 9.4 (2022), 6.4 (2023)
- Gross official reserves (millions of U.S. dollars): 730 (2019), 1,078 (2020), 709 (2021 Prel. SMP), 1,344 (2022), 1,922 (2023), 2,397 (2024)
- Current account balance, incl. transfers (percent of GDP): -3.2 (2019), -4.3 (2020), -2.2 (2021 Prel. SMP), -2.1 (2022), -1.8 (2023)
- Overall fiscal balance (commitment basis, percent of GDP): -2.0 (2019), -0.6 (2020), -2.1 (2021 Prel. SMP), -1.7 (2022), -1.2 (2023)
- Revenue and grants (percent of GDP): 10.8 (2019), 12.7 (2020), 9.8 (2021 Prel. SMP), 11.2 (2022), 12.2 (2023)
- Exports in U.S. dollars, f.o.b. value (annual percent change): -17.4 (2019), -5.4 (2020), 4.6 (2021 Prel. SMP), 46.7 (2022)

*International Monetary Fund — staff report and program documentation (1codea2021002).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- The Democratic Republic of the Congo (DRC) is described as a fragile state vulnerable to recurrent shocks (health, security, macroeconomic volatility).
- Relations with the Fund have been active since early 2019, including a Staff Monitored Program (SMP) and two Rapid Credit Facility (RCF) disbursements: December 2019 and April 2020.
- Economic activity decelerated sharply in 2020 because of the COVID-19 crisis; international reserves decreased to less than two weeks of imports.
- President Tshisekedi requested a three-year Extended Credit Facility (ECF) arrangement to support his medium-term reform program.

### Program objectives and modalities
- Staff proposes a three year-arrangement under the ECF, with access equivalent to 100 percent of DRC’s quota (SDR 1,066.0 million) and semi-annual reviews.
- Purposes of the ECF arrangement:
  - Meet protracted balance of payment needs.
  - Support the authorities’ medium-term reform program aimed at maintaining macroeconomic stability, including by strengthening international reserves.
  - Increase fiscal space for infrastructure and social spending while maintaining a moderate risk of debt distress.
  - Promote sustainable and private sector-led economic growth.
  - Help catalyze budget support from external partners.
- Assessment of debt and repayment capacity:
  - Risk of debt distress remains moderate.
  - Capacity to repay to the Fund is adequate.

### Program priorities and policies
- Key priorities of the ECF arrangement:
  - Stepping up domestic revenue mobilization.
  - Strengthening governance including natural resource management and transparency.
  - Strengthening the monetary policy framework and the central bank’s independence.
- Capacity development is highlighted as crucial for program success.

### Staff views and safeguards
- Staff supports the authorities’ request for an ECF arrangement.
- The Letter of Intent and Memorandum of Economic and Financial Policies demonstrate program ownership and appropriate policies, as well as needed safeguards.
- Considering a highly uncertain environment that could reduce growth and external financing, the authorities have formulated contingency plans that protect priority social spending.

*June 29, 2021*

### Background and response to COVID-19
- DRC has experienced recurrent outbreaks (Ebola, cholera, measles) and large internal displacement; institutions and infrastructure are weak.
- Following elections in December 2018 and a change of President in early 2019, relations with the IMF were reestablished, including an Article IV consultation (August 2019), an SMP (November 2019–May 2020), and RCF support.
- Safeguards and governance diagnostics were carried out (safeguards assessment of the Central Bank of Congo (BCC) in February 2020; governance and anti-corruption assessment, Annex II).
- COVID-19 impact and response:
  - As of late June 2021: 40,254 confirmed cases and 916 deaths.
  - An RCF disbursement equivalent to 25 percent of quota was approved by the Board on April 22, 2020 (this disbursement was in the form of budget support).
- Political developments: end of previous coalition and appointment of Prime Minister Jean Michel Sama Lukonde.

### Recent economic developments (key findings and statistics)
- GDP and sector performance:
  - Preliminary GDP growth in 2020: 1.7 percent (positive, reflecting mining sector resilience).
  - Extractive GDP estimated expansion in 2020: 9.7 percent.
  - Non-extractive GDP contraction in 2020: -1.3 percent.
- Current account and external flows:
  - Improved current account balance in 2020: -2.2 percent of GDP, explained by strong mining exports and lower imports of capital goods despite a drop in remittances.
- Mining sector and Kamoa-Kakula (Box 1 highlights):
  - Kamoa-Kakula projected maximum capacity: 800 kilotonnes per year.
  - Phase 1 production began in May 2021.
  - Initial capital costs estimated at US$1-1.2 billion.
  - Phase 2 expected to start production in 2022Q3 with more than US$1.1 billion capital expenditures planned.
- Fiscal developments:
  - Weak revenues and increased spending pressures produced a sizable fiscal deficit in 2020.
  - Overall fiscal deficit reached 2.1 percent of GDP in 2020, compared to a previous estimate of 0.6 percent.
  - Wage payments represented about two thirds of current spending in 2020 due to implementation of the free education initiative.
  - Grants did not materialize as forecasted; the fiscal deficit was financed by external loans and BCC advances.
- Early 2021 budget:
  - Budget recorded a surplus at the start of 2021 due to fiscal discipline and high commodity prices.
  - Buffers may be reduced due to emergency spending linked to the Goma Volcano eruption in May.
  - Treasury bills’ net placements remained negative in early 2021 due to the pandemic and limited supply of local currency.
- Monetary developments and inflation:
  - Government resorted to BCC advances of about 0.3 percent of GDP (equivalent to US$160 million) through end-April 2020.
  - Inflation: 4.6 percent in 2019 -> 15.7 percent year-on-year in August 2020 (driven by monetary injection, exchange rate depreciation, supply shocks, and easing of monetary policy).
  - Exchange rate depreciation: 13.2 percent between April and August 2020.
  - Monetary policy tightening and discontinuation of advances led to a fall in annualized inflation to 4.8 percent in April 2021.
  - Exchange rate has depreciated by 0.9 percent since January (through April 2021).
  - Official FX reserves: US$730 million at end-2019 to about US$709 million at end-2020.
- Financial sector and supervision:
  - Some banks recorded shortfalls in required reserve positions due to reserve requirements set in local currency amid high dollarization and scarce local currency; a return to positive excess reserves is expected as local currency supply increases.
  - BCC strengthened oversight and regulation: DSIF revising procedures and regulations with Fund technical assistance; a new macro-prudential committee (led by the Ministry of Finance and the BCC) created to promote coordination and monitor systemic risks.

### SMP performance and corrective actions
- SMP performance:
  - Initially satisfactory; later deteriorated due to the COVID-19 pandemic and delays in structural reforms.
  - For the December 2019 test date: all quantitative indicative targets (ITs) met except on contracting/guaranteeing new non-concessional external debt.
  - For March and May 2020 test dates: about half of ITs met; missed ITs included net central bank credit to government and domestic balance on cash basis, reflecting budget slippages financed through BCC advances.
  - Structural benchmarks: all met except restoration of VAT on imports by mining companies (required law modification by Parliament).
- Corrective actions (fully satisfactory implementation under difficult circumstances):
  - Publication of mining contracts: 146 contracts published out of a list of 162 prepared by EITI-DRC and civil society organizations; stepped-up publication of past contracts; budgetary transfers to national EITI committee regularized after appointment of a new coordinator.
  - Preparation of a decree to strengthen public debt management: mandate Public Debt Directorate to evaluate all new debt contracts for consistency with program conditionality and enforce debt reporting from state-owned enterprises (SOEs).
  - Identification of contingent spending and urgent revenue mobilization measures to safeguard execution of the 2020 budget and avoid recourse to BCC advances.
- SMP outcomes: Instrumental in reestablishing working relations, enhancing institutional capacity for program monitoring, and preparing for an ambitious structural reform agenda. Governance and safeguards assessments provided comprehensive diagnostics.

### Selected fiscal table highlights (SMP projections vs. preliminary outcomes; billons of CDF)
- Revenue and grants:
  - SMP proj. end-2019: 9,108; Prel. end-2019: 9,000.
  - Q1 proj.: 2,838; Q1 Prel.: 1,821.
  - Q2 proj.: 2,996; Q2 Prel.: 1,829.
- Revenue:
  - SMP proj. end-2019: 8,468; Prel. end-2019: 8,361.
  - Tax revenue end-2019: 5,796 (proj.) vs. 5,677 (prel.).
- Expenditure:
  - SMP proj. end-2019: 11,365; Prel. end-2019: 10,679.
- Overall fiscal balance (commitment basis):
  - SMP proj. end-2019: -2,257; Prel. end-2019: -1,680.
- Overall fiscal balance (cash basis) in percent of GDP:
  - SMP proj. end-2019: -2.3 percent; Prel. end-2019: -1.2 percent.
- Financing:
  - Domestic financing (banking system) end-2019: 1,075 (proj.) vs. 1,086 (prel.).
  - Foreign financing end-2019: 791 (proj.) vs. 563 (prel.).
- Sources: Congolese authorities; and IMF staff estimates and projections.

### Transparency and governance progress
- Publication of mining contracts and stepped-up transparency: 146 of 162 contracts published; 16 contracts pending verification/collection.
- May 2011 decree provides legal basis for publication of mining, oil, and forestry contracts.
- 2021 EITI-DRC condensed report covers 2018-2020H1 developments.

### Economic outlook and risks
- The document flags a highly uncertain environment that could reduce growth and external financing.
- Authorities have contingency plans focused on protecting priority social spending.
- Overall assessment supports an ECF arrangement to address protracted balance of payments needs and support medium-term reforms.

*Source: IMF staff report — EXECUTIVE SUMMARY (1codea2021002).*

### 12.      The near-term economic outlook still remains uncertain and dependent on the

### 12.      The near-term economic outlook still remains uncertain and dependent on the

### Near-term outlook and risks
- Following the sharp deceleration in 2020, GDP growth is expected to slowly recover from 2021 onwards thanks to the boom in the mining sector—with Kamoa’s production ahead of schedule—and the expansion of other mining projects, and the gradual resumption of public infrastructure and private investment projects.
- The fiscal stance will tighten somewhat in 2021 despite a significant pickup in externally financed projects.
- The external current account will continue to improve in 2021, propelled by high mining prices and export volumes, leading to an improvement in international reserves (which will nonetheless remain limited).
- Risks:
  - Downside: a protracted pandemic, slower recovery, political instability.
  - Upside: quicker resumption of public and private investments, improved international relationships, booming mining exports.
- The outlook is predicated on the temporary nature of the pandemic and a gradual normalization of the global economic outlook.

### Medium-term outlook and program objectives
- Medium-term growth depends on implementation of reforms to ensure macro stability and realize DRC’s high growth potential.
- Average non-extractive GDP growth during the program period is expected to increase to 5.1 percent, compared to an average growth of 4.6 percent during 2014-19.
- The ECF arrangement aims to:
  - maintain macroeconomic stability, including by strengthening international reserves;
  - increase fiscal space for infrastructure and social spending while maintaining a moderate risk of debt distress;
  - promote sustainable and private sector-led economic growth.
- Program focus areas:
  - stepping up domestic revenue mobilization;
  - strengthening governance including natural resource management and transparency;
  - strengthening the monetary policy framework and the central bank’s independence.
- Debt and buffers:
  - Based on an updated DSA, DRC remains at a moderate risk of external and overall debt distress, with some space to absorb shocks.
  - Most external debt thresholds are breached under stress tests, highlighting vulnerability to external shocks.
  - Given limited buffers, prudent borrowing policies are essential, prioritizing concessional loans and strengthening debt management policies.

### Fiscal policy, fiscal space, and public financial management
- Fiscal anchor: no central bank financing to the government and maintaining a moderate risk of debt distress.
- Absent additional grants and financing, domestic fiscal deficits of up to 0.5 percent of GDP linked to net issuance of Treasury bills (including introduction of dollar-indexed T-bills in 2021Q2).
- The ECF arrangement is expected to catalyze budget and project support from external partners (World Bank, AfDB).
- 2021 budget:
  - Approved 2021 Budget Law broadly in line with staff revenue projections and conservative financing assumptions; ambitious shift from current to capital spending.
- Revenue mobilization outcomes and targets:
  - Central government revenue to GDP averaged 9.9 percent of GDP over the last five years, with mining revenues representing almost a third.
  - Sub-Saharan Africa (SSA) average: 17.3 percent.
  - ECF target: increase the revenue to GDP ratio by 3.5 percentage points by 2023, 2.1 percentage points above the 2019 level.
- Four axes of revenue mobilization (MEFP ¶22):
  - Restoring VAT normal functioning:
    - VAT collections fell by half (from 4.4 percent of GDP) between 2015 and 2019.
    - A self-liquidating VAT was introduced in March 2021 for imports from mining companies.
    - The General Inspectorate of Finance (IGF) will conduct an audit to evaluate the VAT arrears to mining companies by December 2021, to help determine a repayment schedule.
  - Rationalizing non-tax and parafiscal charges:
    - All legal provisions on non-tax revenues consolidated in a single document (SB, September 2021).
    - Authorities will elaborate and adopt a plan to rationalize non-tax charges by March 2022, with Fund technical assistance.
    - Rationalization of parafiscal charges expected by December 2022.
    - Excise duties to be streamlined and rates adjusted to compensate for revenue losses.
  - Streamlining tax expenditures:
    - Tax expenditures about 22 percent of central government revenue as of 2017.
    - Authorities committed to estimate and publish tax expenditures yearly and finalize a rationalization plan based on IMF CD recommendations by end-2021.
  - Modernizing revenue administration:
    - Governance of three main revenue agencies to be strengthened, taxpayer rights ascertained, procedures digitalized and streamlined.
    - Continued computerization projects: ISYS-Régies, data warehouse, LOGIRAD.
    - Customs administration to implement ASYCUDA World at all custom offices, starting with additional 10 offices (SB, December 2021).
    - A decree to strengthen internal audit functions by revising governance of the three tax agencies.
- Spending discipline and composition:
  - Domestically financed investment should increase from 0.3 percent of GDP in 2020 to over 2.5 percent of GDP in 2023.
  - With free education initiative, wages rose from about one third of total revenue in 2018 to two thirds in 2020; authorities committed to rationalize the wage bill and non-priority expenditures.
  - Authorities will improve fuel price structure, limit associated subsidies, publish independent audit of stock of arrears with a repayment plan included in the 2022 budget law.
  - Plans to gradually reform civil servants’ pension system to limit government transfers and ensure long-term sustainability.
- Public Financial Management (PFM) reforms (MEFP ¶27):
  - Reinforce budgetary credibility and inter-institutional coordination and macroeconomic forecasting.
  - Enhance treasury management and consolidate government accounts to set up a single treasury account at the BCC.
  - Strengthen public procurement, reinforce expenditure chain, limit emergency procedures.
  - Publish an annual fiscal risks statement.
  - Restore the State's accounting function by creating the treasury and public accounting general directorate (DGTCP).
  - Strengthen financial reporting and oversight, including for state-owned enterprises.
  - IMF CD activities will support these reforms.

### COVID-related expenditure transparency (Box 2)
- Identified COVID-19-related spending: US$52 million.
  - GAVI contributions: US$16 million.
  - Ministry of Health: about US$10 million.
  - Donor commitments: more than US$200 million; executed by end-April 2021: US$116 million.
- Contracts and publication:
  - Authorities identified 35 COVID-19 related contracts over the US$12,000 limit.
  - By June 23, 2021, the authorities published 32 contracts, totaling US$6.8 million, including one contract above one million with supplier name but not beneficial owner.
- Capacity and audit commitments:
  - Requested technical assistance to publish beneficial ownership in public contracts aiming to lower the US$1 million threshold.
  - Committed to limit emergency procedures and produce reconciled quarterly reports on their use.
  - Commit to include a chapter on COVID-related spending in the annual Cour des Comptes report to be published after presentation to Parliament in September 2021.
  - IGF special audit launched; IGF audits can sustain judicial prosecution when irregularities are found, which prevents their publication.
- COVID spending table highlights:
  - Total: 95.8 (CF billion) and 51.7 (US$ million)
  - of which GAVI: 30.1 (CF billion) and 16.3 (US$ million)
  - Ministry of Health: 18.6 (CF billion) and 10.1 (US$ million)
  - of which new doctors: 12.5 (CF billion) and 6.7 (US$ million)
  - Provinces: 2.9 (CF billion) and 1.6 (US$ million)
  - Others: 44.1 (CF billion) and 23.8 (US$ million)
  - Publication: 12.6 (CF billion) and 6.8 (US$ million)
    - of which between US$12,000 and US$1,000,000: 5.1 (CF billion) and 2.7 (US$ million)
    - > US$1,000,000: 7.5 (CF billion) and 4.1 (US$ million)
  - Memo items: Expenses validated (in percent of total) 57.6; Exchange rate (2020, average) 1851.5

### Monetary and financial sector policies
- Monetary policy modernization:
  - Monetary aggregate targets expected to remain the main medium-term nominal anchor.
  - Adoption of new reserve requirement framework and MoU between BCC and Ministry of Finance to regularize outstanding credit of the government (SBs, December 2021) will modernize instruments and strengthen BCC financial position (MEFP, ¶35).
  - Full constitution of the BCC board in accordance with the 2018 BCC Law (prior action) is needed to enhance BCC independence and accelerate implementation of the 2020 safeguards assessment recommendations.
  - Discontinuation of advances and ban on new guarantees from the BCC to the private sector; plan for gradual elimination of existing operations.
- Financial sector supervision:
  - Enhance risk-based supervisory framework and bank oversight.
  - Submission of new Commercial Banking Law to Parliament by end-November 2021 integrating IMF staff comments (SB).
  - Financial Sector Stability Review (FSSR) planned for end-2021 to provide diagnostic and strategy with CD priorities (MEFP, ¶38).
- Reserves and external position:
  - Staff assesses DRC’s external position in 2020 as moderately weaker than level implied by fundamentals and desirable policies.
  - Gross official FX reserves of the BCC projected to reach US$1.3 billion by end-2021 or 3.4 weeks of imports, and about 6 weeks of imports by end-2024.
  - Measures to strengthen reserves: ECF disbursements, new reserve requirement regulation, transfer abroad of BCC FX deposits at local commercial banks.
  - Repatriation requirement of 60 percent of export receipts constitutes a capital flow management measure; should be scaled back as adjustment progresses and pressures subside.
  - Given very low FX reserves and importance of exchange rate as shock absorber, authorities committed to minimizing FX interventions (MEFP, ¶37).

### Governance, transparency, and mining sector reforms
- Business environment:
  - Hampered by excessive regulation, multiplicity of levies; priorities include streamlining levies and implementing a fair and predictable tax system (¶15).
  - Improve resolution of commercial disputes, enforcement and protection of property rights (MEFP, ¶33).
- Anti-corruption and governance:
  - Governance assessment highlighted key vulnerabilities.
  - Governance strategy includes strengthening the Anti-Corruption Prevention Agency (operational since July 2020) in line with UN Convention Against Corruption.
  - Recent arrests and sentences for embezzlement of public funds.
  - Commitments to endow the Court of Auditors and the IGF with sufficient independence, resources, and powers (MEFP, ¶29-30).
- AML/CFT and asset declarations:
  - Amendments to AML/CFT Law (including banning anonymous bank accounts) to be submitted to parliament.
  - Amendments to asset declaration framework to strengthen measures concerning politically exposed persons to be submitted to Parliament (MEFP, ¶32).
- Mining transparency:
  - Transparency commitments under the SMP delivered satisfactory results.
  - Continuous publication of all new contracts; all remaining past mining contracts expected to be gradually published.
  - Government formally adopted the EITI roadmap on mining transparency in early June (prior action).
  - Complete and audited financial statements of mining SOEs need regular publication, starting with GECAMINES (SB, August 2021) (MEFP, ¶31).

*International Monetary Fund — Democratic Republic of the Congo, selected excerpts and projections from the ECF program documentation*

### 28.      The authorities are concerned about the impact of climate change, though a

### 1codea2021002 - 28.      The authorities are concerned about the impact of climate change, though a

### Climate change, natural resources, and energy
- The authorities are concerned about the impact of climate change, though a comprehensive climate change strategy is yet to be formalized.
- A major plank will be an update of forest management and land use regulations, under the helm of the Central African Forest Initiative, which coordinates donors’ actions in this domain.
- Fiscal revenues linked to the global carbon market could offer promising opportunities, but deforestation is an important concern.
- Important progress in electrification must be achieved by tapping into the country’s vast renewable energy potential while protecting and enhancing the value of its enormous natural resources (MEFP, ¶34).

### Data issues and capacity development
- Data provision is broadly adequate for surveillance and program monitoring, with shortcomings that need to be addressed, including with Fund CD support, notably on fiscal statistics, debt data coverage, and globally on the timeliness of the data submission.
- Capacity development is crucial for program success. A revised CD strategy was discussed with the authorities (Annex VII), taking stock of evolving needs in the crisis context.
- Priorities are fully aligned and integrated with program objectives, including strengthening reforms in tax policy and administration, PFM, monetary and financial sector oversight, and the anti-corruption legal framework.

### Program modalities and financing
- Authorities request a three-year arrangement under the ECF to meet protracted balance of payment needs and support their medium-term reform program.
- Staff proposes access of SDR1,066 million, or 100 percent of quota, under the ECF arrangement to be disbursed evenly over the program period.
- The ECF arrangement will be used to increase the very low level of BCC FX reserves, and together with the CCRT and DSSI relief initiatives, would partially fill external financing gaps.
- Program monitoring: semi-annual reviews, with Quantitative Performance Criteria (QPCs) for the end of the second and fourth quarters, and Indicative Targets (ITs) for the end of the first and third quarters.
  - QPCs will be on (i) net international reserves of the BCC; (ii) net credit of the BCC to the central government; (iii) net domestic assets of the BCC; (iv) domestic balance on a cash basis; (v) contracting or guaranteeing new non-concessional external debt by the central government; and (vi) external payment arrears.
  - Monetary QPCs will be validated by an external auditor.
  - Indicative targets: BCC deposits used as guarantees for central government loans, accumulation of wage arrears, government revenues and social spending.
  - Reform progress evaluated based on structural benchmarks.
- Safeguards: BCC Board constitution in accordance with the 2018 BCC Law (prior action) is expected to accelerate implementation of recommendations of the 2020 safeguards assessment; priority reforms include developing compliance, strengthening Audit Committee capacity and oversight, and adopting IFRS. BCC committed to using a monitored account at the BIS for Fund disbursements and validating monetary QPCs and transactions on the BIS monitored account by external auditors.

### Financing assurances, exceptional financing, and gaps
- Projected financing needs include assumptions for clearance of the current stock of external arrears of US$282 million over a 5-year period (see DSA).
- Disbursements of exceptional financing by other partners are expected to amount to US$357 million (Text Table 3), ensuring full financing of the first year of the program.
- For 2022 and later years, there are good prospects of additional support by these lenders; over the total program period, exceptional financing from sources other than the IMF accounts for about 58 percent of the external financing gap.
- Text Table 3 (selected figures):
  - Current Account: -1,136 Million USD (-2.1 percent of GDP) in 2021; -1,088 Million USD (-1.8 percent of GDP) in 2022; -975 Million USD (-1.5 percent of GDP) in 2023; -927 Million USD (-1.3 percent of GDP) in 2024.
  - Current and Capital Account excl. New Budget Grant Financing (A): -1,100 Million USD (-2.0 percent of GDP) in 2021; -1,434 Million USD (-2.4 percent of GDP) in 2022; -1,353 Million USD (-2.1 percent of GDP) in 2023; -1,289 Million USD (-1.8 percent of GDP) in 2024.
  - Financial Account excl. Change in Reserves and New Loan Financing (B): -938 Million USD (-1.7 percent of GDP) in 2021; -938 Million USD (-1.6 percent of GDP) in 2022; -736 Million USD (-1.1 percent of GDP) in 2023; -947 Million USD (-1.4 percent of GDP) in 2024.
  - Change in Gross Reserves (C): 635 Million USD (1.2 percent of GDP) in 2021; 578 Million USD (1.0 percent of GDP) in 2022; 475 Million USD (0.7 percent of GDP) in 2023; 381 Million USD (0.5 percent of GDP) in 2024.
  - Overall Financing Needs (D=A-B-C): -798 Million USD (-1.5 percent of GDP) in 2021; -1,074 Million USD (-1.8 percent of GDP) in 2022; -1,091 Million USD (-1.7 percent of GDP) in 2023; -724 Million USD (-1.0 percent of GDP) in 2024.
  - BOP Financing (=-D): 798 Million USD (1.5 percent of GDP) in 2021; 1,074 Million USD (1.8 percent of GDP) in 2022; 1,091 Million USD (1.7 percent of GDP) in 2023; 724 Million USD (1.0 percent of GDP) in 2024.
  - IMF Disbursements (Memorandum): 441 Million USD (0.8 percent of GDP) in 2021; 440 Million USD (0.7 percent of GDP) in 2022; 446 Million USD (0.7 percent of GDP) in 2023; 224 Million USD (0.3 percent of GDP) in 2024.
  - Other Exceptional Financing: 357 Million USD (0.7 percent of GDP) in 2021; 630 Million USD (1.1 percent of GDP) in 2022; 451 Million USD (1.0 percent of GDP) in 2023; 500 Million USD (0.7 percent of GDP) in 2024.
  - Budget Loans: 196 Million USD (0.4 percent of GDP) in 2021; 300 Million USD (0.6 percent of GDP) in 2022; 305 Million USD (0.5 percent of GDP) in 2023; 225 Million USD (0.3 percent of GDP) in 2024.
  - World Bank: 153 Million USD (0.3 percent of GDP) in 2021; 300 Million USD (0.6 percent of GDP) in 2022; 230 Million USD (0.4 percent of GDP) in 2023; 150 Million USD (0.2 percent of GDP) in 2024.
  - AfDB: 43 Million USD (0.1 percent of GDP) in 2021; 0.0 Million USD (0.0 percent of GDP) in 2022; 75 Million USD (0.1 percent of GDP) in 2023; 75 Million USD (0.1 percent of GDP) in 2024.
  - Budget Grants: 161 Million USD (0.3 percent of GDP) in 2021; 300 Million USD (0.5 percent of GDP) in 2022; 340 Million USD (0.5 percent of GDP) in 2023; 275 Million USD (0.4 percent of GDP) in 2024.
  - Memorandum items: Gross reserves: 1,344 in 2021; 1,922 in 2022; 2,397 in 2023; 2,779 in 2024. in weeks of non-aid imports: 3.4 in 2021; 4.6 in 2022; 5.3 in 2023; 5.8 in 2024. External Debt Amortization Due: 426 in 2021 (0.8 percent of GDP); 482 in 2022 (0.8 percent of GDP); 585 in 2023 (0.9 percent of GDP); 569 in 2024 (0.8 percent of GDP). of which public sector: 255 in 2021 (0.5 percent of GDP); 303 in 2022 (0.5 percent of GDP); 300 in 2023 (0.5 percent of GDP); 223 in 2024 (0.3 percent of GDP).
  - Note: The ECF assumes total access at 100 percent of quota, with 7 equally distributed disbursements.

### Risk assessment and contingency planning
- Authorities have devised contingency measures given substantial uncertainty (delayed recovery from the pandemic, lower than projected external financing, sudden drop in mining prices).
  - Adverse scenario: reduce lower priority spending within goods and services and domestically financed capital expenditures, while preserving social spending.
  - Favorable scenario: higher mineral prices and positive impact of reforms would increase government revenues; authorities will consider additional spending in priority areas—particularly domestically financed investment—while respecting program objectives of fiscal and debt sustainability; this should lead to larger reserve accumulation at the BCC.
- Authorities agreed to discuss the use of the upcoming SDR allocation during the first ECF review (MEFP, ¶19).

### Capacity to repay and debt dynamics
- DRC’s capacity to repay the Fund is assessed as adequate but subject to considerable risks given the low level of FX reserves, state fragility, and high vulnerability to recurrent shocks.
- Fund credit outstanding is projected to remain close to 100 percent of gross international reserves throughout the program.
- Total obligations to the Fund will peak in 2029 at 10.6 percent of gross international reserves (0.5 percent of GDP), both around the top quartile of historical distributions of PRGT-eligible countries.
- Associated debt servicing risks are mitigated by moderate indebtedness and availability of concessional financing.

### Staff appraisal: macroeconomic context and reform priorities
- The DRC is a fragile state with:
  - low and fragmented government revenue;
  - substantial development and infrastructure needs;
  - very low FX reserves;
  - a highly dollarized financial system;
  - weak institutional capacity.
- Pandemic effects: negatively affected the non-extractive economy and government revenue collection.
- Monetary developments: extension of advances to government by the BCC, negative supply shocks and easing monetary policy led to rapid exchange rate depreciation and acceleration of inflation that required subsequent monetary policy tightening.
- Mining sector: expected to continue to expand fueled by record high prices and investments in new projects.
- SMP performance was mixed but corrective actions were strong, paving the way for an ECF arrangement; macroeconomic policies adjusted to maintain stability, including discontinuing central bank advances and tightening monetary policy; progress in publication of mining contracts and approval of a 2021 budget based on realistic revenue and financing projections.
- Authorities’ medium-term economic and reform program focuses on:
  - maintaining macroeconomic stability;
  - increasing fiscal space for infrastructure and social spending;
  - promoting sustainable and private sector-led growth.
- ECF aims to accompany efforts towards:
  - (i) stepping up domestic revenue mobilization;
  - (ii) strengthening governance including natural resource management and transparency;
  - (iii) strengthening the monetary policy framework and the central bank’s independence.

### Key policy recommendations and reform measures
- Domestic revenue mobilization:
  - comprehensive rationalization of tax exemptions and non-tax and parafiscal charges;
  - restoration of the normal functioning of the VAT and audit of VAT arrears;
  - further computerization of the revenue chain and customs.
- Public financial management and spending discipline:
  - improve inter-institutional coordination for budget formulation and execution;
  - set up the single treasury account at the BCC;
  - strengthen public procurement system and the expenditure chain and accounting function;
  - limit non-priority spending and improve budgeting of wage and pension outlays;
  - monitor targeted and high-impact health-related spending under the ECF.
- Governance and business environment:
  - adopt EITI medium-term roadmap and commit to publication of all new and existing mining contracts;
  - reinforce anti-corruption institutions and align legal AML/CFT framework with international standards;
  - streamline multiplicity of levies and implement a fair and predictable tax collection system.
- Monetary and financial sector reforms:
  - modernize monetary policy framework and strengthen banking supervision and regulation;
  - reinforce BCC’s governance and independence and strengthen its financial position;
  - minimize FX interventions and allow the exchange rate to act as a shock absorber;
  - adopt a new Commercial Banking Law to strengthen supervision and intervention powers and foster financial inclusion;
  - implement safeguards assessment recommendations and Fund CD support to enhance FX reserves management.

*International Monetary Fund — Democratic Republic of the Congo: selected extracts from IMF staff report and program documents*

### 44.      Based on the protracted balance of payment need and policy commitments, staff

### 1codea2021002 - 44. Based on the protracted balance of payment need and policy commitments, staff

### IMF program decision and financing
- Staff supports the authorities’ request for a three year-arrangement under the ECF, with access equivalent to 100 percent of DRC’s quota (SDR 1,066.0 million).
- Table of proposed reviews and purchases under the three-year ECF arrangement:
  - On July 15, 2021: Approved three-year ECF arrangement — SDR 152.3 million (Share of Quota 14.3)
  - On or after September 15, 2021: Completed the first review based on end-June, 2021 performance criteria — SDR 152.3 million (14.3)
  - On or after March 15, 2022: Completed the second review based on end-December, 2021 performance criteria — SDR 152.3 million (14.3)
  - On or after September 15, 2022: Completed the third review based on end-June, 2022 performance criteria — SDR 152.3 million (14.3)
  - On or after March 15, 2023: Completed the fourth review based on end-December, 2022 performance criteria — SDR 152.3 million (14.3)
  - On or after September 15, 2023: Completed the fifth review based on end-June, 2023 performance criteria — SDR 152.3 million (14.3)
  - On or after March 15, 2024: Completed the sixth and final review based on end-December, 2023 performance criteria — SDR 152.3 million (14.3)
  - Total SDR 1066.0 million (100.0 percent of quota)

### External and real sector developments highlighted
- Commodity and trade dynamics:
  - "Copper and cobalt prices have recovered substantially after falling slightly in 2020."
  - "Exports of goods are steadily improving" (export volumes reflected recovery).
  - "Imports plummeted in response to the economic contraction" with an associated "improvement in the trade balance."
  - "The level of international reserves improved following the RCF disbursements in December 2019 and April 2020."
- Real and fiscal indicators (selected dynamics):
  - "The economy decelerated sharply in 2020 due to the fall in non-mining GDP."
  - "Inflation pressures have started to abate after a sharp jump in 2020."
  - "Fiscal revenues remain low due to a weaker economy" which forced "a deceleration in expenditures" and "an increase in the fiscal deficit in 2020."
  - NCG (net central government?) "improved following the RCF disbursement and the discontinuation of BCC advances since end-April 2020."
- Monetary and financial indicators (selected dynamics):
  - "Credit to the private sector has risen in local currency, but that was mostly due to the exchange rate depreciation."
  - "Deposits, in local currency and FX, have continued to increase."
  - "Excess reserves remain highly volatile and became temporarily negative in recent months due to the large increase in FX deposits and exchange rate depreciation."
  - "After a long period of stability, the nominal exchange rates crept up before stabilizing again... but the real effective exchange rate has hardly changed for the last two years."

### Key macroeconomic projections and indicators (from Table 1 — selected entries preserved exactly as in source)
- Real GDP (annual change): 4.4 (2019), 3.2 (2020), 1.7 (2021 Prel. SMP), 4.9 (2022), 5.6 (2023), 6.6 (2024), 6.8 (2025), 6.7 (2026)
- Extractive GDP (annual change): 1.0 (2019), -2.4 (2020), 9.7 (2021 Prel. SMP), 11.0 (2022), 7.9 (2023), 7.5 (2024), 5.4 (2025), 5.4 (2026)
- Non-Extractive GDP (annual change): 5.8 (2019), 5.4 (2020), -1.3 (2021 Prel. SMP), 2.2 (2022), 4.5 (2023), 6.2 (2024), 7.5 (2025), 7.3 (2026)
- Consumer prices, period average: 4.7 (2019), 5.0 (2020), 11.4 (2021 Prel. SMP), 9.4 (2022), 6.4 (2023), 6.6 (2024), 6.9 (2025), 6.9 (2026)
- Gross official reserves (millions of U.S. dollars): 730 (2019), 1,078 (2020), 709 (2021 Prel. SMP), 1,344 (2022), 1,922 (2023), 2,397 (2024), 2,779 (2025), 2,916 (2026), 3,151 (2027 projected in table)
- Current account balance, incl. transfers (percent of GDP): -3.2 (2019), -4.3 (2020), -2.2 (2021 Prel. SMP), -2.1 (2022), -1.8 (2023), -1.5 (2024), -1.3 (2025), -1.0 (2026), -1.3 (2027)
- Overall fiscal balance (commitment basis, percent of GDP): -2.0 (2019), -0.6 (2020), -2.1 (2021 Prel. SMP), -1.7 (2022), -1.2 (2023), -1.1 (2024), -1.2 (2025), -1.2 (2026), -1.6 (2027)
- Revenue and grants (percent of GDP): 10.8 (2019), 12.7 (2020), 9.8 (2021 Prel. SMP), 11.2 (2022), 12.2 (2023), 13.0 (2024), 14.0 (2025), 14.1 (2026), 14.4 (2027)
- Exports in U.S. dollars, f.o.b. value (annual percent change): -17.4 (2019), -5.4 (2020), 4.6 (2021 Prel. SMP), 46.7 (2022), 7.8 (2023), 7.0 (2024), 5.4 (2025), 6.0 (2026), 3.3 (2027)
- Imports in U.S. dollars, f.o.b. value (annual percent change): -13.6 (2019), 0.1 (2020), -8.3 (2021 Prel. SMP), 54.1 (2022), 7.2 (2023), 7.2 (2024), 6.5 (2025), 7.0 (2026), 3.6 (2027)

### Central government finances (selected figures from Tables 2a/2b — preserved exactly)
- Revenue and grants (Billions of CDF): 9,000 (2019 Prel.), 11,409 (2020 SMP year), 8,820 (2021 prel.)
- Revenue (Billions of CDF): 8,361 (2019), 10,189 (2020), 7,889 (2021 prel.)
- Expenditures (Billions of CDF): 10,679 (2019), 11,915 (2020), 10,693 (2021 prel.)
- Overall fiscal balance (commitment basis, Billions of CDF): -1,680 (2019), -506 (2020), -1,873 (2021 prel.)
- Overall fiscal balance (commitment basis, percent of GDP): -2.0 (2019), -0.6 (2020), -2.1 (2021 prel.)

### Monetary and financial aggregates (selected entries from Table 3 — preserved exactly)
- Broad Money (M2, Billions of CDF): 12,905 (2019), 12,998 (2020), 14,901 (2021 Q1 prel.), 16,485 (Q2 prel.), 18,665 (Q3 prel.), 18,953 (Q4 prel.), 21,146 (2022 proj Q1), 22,146 (Q2), 23,158 (Q3), 27,158 (Q4), 31,802 (2023), 37,324 (2024)
- Net foreign assets (Billions of CDF, central bank and commercial banks combined): 4,976 (2019), 4,789 (2020), 6,655 (2021 Q1 prel.), 8,623 (Q2), 9,670 (Q3), 9,627 (Q4), 11,369 (2022 Q1), 12,193 (Q2), 13,165 (Q3), 16,347 (Q4), 19,969 (2023), 24,044 (2024)
- Credit to the economy (Billions of CDF): 5,822 (2019), 6,004 (2020), 6,786 (2021 Q1 prel.), 6,831 (Q2), 7,442 (Q3), 6,998 (Q4), 8,144 (2022 Q1), 8,245 (Q2), 8,488 (Q3), 9,825 (Q4), 11,427 (2023), 13,298 (2024)

### Balance of payments (selected figures from Table 4 — preserved exactly)
- Current Account Balance (excl. budget grants, Millions of US$): -1,620 (2019 Est.), -1,166 (2020), -1,297 (2021), -1,388 (2022), -1,314 (2023), -1,202 (2024)
- Exports of Goods (Millions of US$): 13,184 (2019), 13,789 (2020), 20,225 (2021), 21,804 (2022), 23,324 (2023), 24,588 (2024)
- Imports of Goods (Millions of US$): 12,943 (2019), 11,865 (2020), 18,282 (2021), 19,598 (2022), 21,011 (2023), 22,377 (2024)
- Gross reserves (Millions of US$): 729.6 (2019), 708.9 (2020), 1,344.4 (2021), 1,922.5 (2022), 2,397.3 (2023), 2,778.8 (2024)
- Net Lending(+)/Borrowing(-) (Millions of US$): -1,215 (2019), -540 (2020), -1,100 (2021), -1,434 (2022), -1,353 (2023), -1,289 (2024)

### Capacity to repay the Fund (selected entries from Table 5 — preserved exactly)
- Total obligations (In millions of SDRs): 32.0 (2020), 9.9 (2021), 0.3 (2022), 0.3 (2023), 0.3 (2024), 80.2 (2025), 106.9 (2026), 183.0 (2027), 243.9 (2028), 304.8 (2029)
- Fund credit outstanding (end-period, In millions of SDRs): 542.9 (2020), 837.6 (2021), 1,142.2 (2022), 1,446.8 (2023), 1,599.1 (2024), 1,519.1 (2025), 1,412.5 (2026), 1,229.8 (2027)
- Fund credit outstanding (end-period, In millions of U.S. dollars): 780.8 (2020), 1,215.8 (2021), 1,669.0 (2022), 2,122.3 (2023), 2,353.1 (2024), 2,241.9 (2025), 2,090.8 (2026), 1,820.3 (2027), 1,459.7 (2028)

### Financial soundness indicators (selected entries from Table 6 — preserved exactly)
- Regulatory capital to risk-weighted assets: 13.7 (2018), 13.9 (Mar-19), 13.8 (Jun-19), 13.8 (Sep-19), 13.9 (Dec-19), 14.1 (Mar-20), 14.5 (Jun-20), 14.7 (Sep-20), 13.5 (Dec-20), 14.0 (Mar-21), 13.6 (latest)
- NPLs to gross loans: 13.8 (2018), 13.0 (Mar-19), 13.2 (Jun-19), 16.1 (Sep-19), 21.1 (Dec-19), 17.2 (Mar-20), 18.1 (Jun-20), 20.6 (Sep-20), 18.9 (Dec-20), 19.0 (Mar-21)
- Deposits/Loans (liquidity): 168.9 (2018), 183.3 (Mar-19), 184.6 (Jun-19), 174.1 (Sep-19), 176.3 (Dec-19), 174.8 (Mar-20), 182.3 (Jun-20), 203.1 (Sep-20), 220.5 (Dec-20), 226.0 (Mar-21)
- Foreign currency-denominated loans to total loans: 90.0 (2018), 92.7 (Mar-19), 91.8 (Jun-19), 91.8 (Sep-19), 91.5 (Dec-19), 89.5 (Mar-20), 87.9 (Jun-20), 87.9 (Sep-20), 89.0 (Dec-20), 88.9 (Mar-21)

### Prior actions and structural benchmarks (selected items — preserved exactly)
- Prior Action (Met): Transfer USD 160 million in FX deposits from BCC accounts at domestic commercial banks to BCC accounts in overseas banks which would be accounted for as reserves — December 5, 2019.
- Prior Action (Met): VAT: The Minister of Finance to make the DGI responsible for the payment of VAT refunds to mining companies (using a risk-based approach) through an escrow accounts receiving proceeds from the VAT collected by the DGDA from mining companies and a quota of overall VAT collected by the DGI — January 2020.
- Prior Action (Not met): Lift the suspension of VAT collection for mining companies at the customs — March 2020.
- Prior Action (Met): PIT: Enforce the inter-ministerial circular imposing personal income tax withholding on the totality of the compensation (including salaries, bonuses, and other forms of remuneration) of civil servants, other public employees and employees of political institutions — January 2020.
- Prior Action (Met): Publish a 2020 Treasury Plan on the Ministry of Finances' website, consistent with realistic receipts and financing previsions to serve as a guide for expenditure commitments — January 2020.
- Prior Action (Met): Publish the complete, audited 2018 financial statements of the BCC on the BCC's website — December 2019.

### SMP indicative targets monitoring (selected outcomes — preserved exactly)
- Floor on changes in net foreign assets of the BCC (US$ millions): -146 (SMP), -155 (Adjusted SMP), 104 (Status: Met) for March; subsequent dates show mixed met/not met outcomes (e.g., May: 231/443/-43 Not met).
- Ceiling on accumulation of new central government loans guaranteed by the BCC (CF billions): 372 (SMP) ... 295 Met; later tests show instances "Not met."
- Floor on domestic balance - cash basis (CF billions): -862 (SMP) ... -518 Met in initial tests; other dates "Not met."

*Sources: Congolese authorities; IMF staff estimates and projections; International Monetary Fund.*

### Annex I. Summary of DRC Country Engagement Strategy

### Annex I. Summary of DRC Country Engagement Strategy

### A. Background and Context
- Despite vast mineral resources and other riches, the Democratic Republic of Congo (DRC) fits almost all aspects of state fragility, with a history marked by protracted internal armed conflict and lack of security.  
- Six million Congolese are either internally displaced persons or refugees in neighboring countries and hundreds of armed groups are fighting across the country.  
- High levels of corruption, state capture, and weak governance exist in most areas of the economy and the society.  
- Poverty is widespread with 71 percent of the population in absolute poverty. Social indicators are among the worst in the world in the context of a high population growth rate.  
- DRC is subject to repeated outbreaks of deadly diseases such as Ebola, measles, or cholera.  
- Physical and social infrastructure is weak and insufficient; few roads and airports have left large parts of the country inaccessible. Safety nets are very limited.  
- Political situation has been marked by instability; the first peaceful transfer of power since independence occurred in 2019 when President Tshisekedi took over from President Kabila. President Tshisekedi has shown a willingness to open the political system and to fight against corruption.

### Lessons from the Staff Monitored Program (SMP)
- Performance under the SMP was mixed due partly to the COVID pandemic and to weaknesses in policy management. Quantitative indicative targets were only partially met due to COVID-19 impacts and pre-pandemic policy slippages. Revenue mobilization efforts continued to lag, while other structural benchmarks (SBs) were met. Unrealistic budgets led to spending overruns, a breakdown of the expenditure process, and use of emergency procedures.
- Authorities committed corrective actions: central bank advances were discontinued after a MOU between the central bank and the ministry of finance; all new mining contracts since November 2019 have been published; budget allocations to the national committee of the EITI will be released following a takeover by a new coordinator; public debt management and monitoring will be strengthened.
- The SMP was instrumental in reestablishing effective working relations with the authorities, enhancing institutional capacity for program monitoring, improving cooperation between the MoF and the central bank, and preparing the ground for an ambitious yet realistic structural reform agenda. Governance and safeguards assessments provided comprehensive diagnostics.
- Key lessons for future Fund engagement:
  - Close and continued engagement by staff with various government institutions is essential.
  - Broad involvement of the authorities in the design of targets and benchmarks is crucial.
  - Balance significant and realistic program targets given the complex political economy.
  - Technical assistance will be needed to strengthen implementation capacity for policies and structural reforms.
  - Further work is needed on data provision; absence of a Fund program since 2012 has weakened capacity and coordination among institutions.

### B. Strategy Going Forward
- Medium-term objectives the DRC needs to devise:
  - Achieving rapid, sustainable, and inclusive economic growth to help reduce poverty.
  - Reducing large physical and social infrastructure gaps.
  - Increasing government spending through improved domestic revenue mobilization.
  - Ensuring debt sustainability.
  - Re-affirming the central objective of price stability, enhance central bank independence and operations and strengthen the oversight and regulation of the financial system.
  - Improving economic governance and reducing corruption.
- The new President and his government support these objectives, but questions remain on the ability to deliver tangible reform proposals, including in governance.

### Reengagement and Key Policies through an ECF Arrangement
- Rationale for an ECF arrangement:
  - DRC faces protracted balance of payment problems and weak growth; recurrent shocks; weak public finances and external buffers; insufficient economic growth relative to population growth; recurrent inflation and exchange rate depreciation bouts.
  - Stock of external debt is relatively low, but risk of debt distress is moderate due to low (and volatile) fiscal revenue and export receipts.
  - A medium-term Fund-supported program should help achieve durable macroeconomic stability and poverty reduction and catalyze donor support; program design must account for fragmented politics, entrenched vested interests, and the electoral calendar.
- Key policies under an ECF arrangement:
  - Strengthen framework and technical capacity for macroeconomic and natural resource management: enhance coordination between key institutions, eliminate fiscal dominance limiting the independence of the BCC, strengthen oversight and control of SOEs, and favor concessional lending to ensure debt sustainability.
  - Step up domestic revenue mobilization: streamline and simplify taxes, improve operations of tax collection agencies, reduce redundancies, fight fraud and evasion at borders, and fight corruption of tax and customs officials.
  - Enhance control and discipline over spending: approve realistic budgets, strictly implement public procurement law provisions, minimize use of emergency procedures, strengthen cash and Treasury management, and reinforce budget reporting and audit functions. More technical assistance on PFM issues will be needed.
  - Boost quality, inclusiveness, and growth-impact of government spending: increase public spending on infrastructure, direct sizable resources to health and education, provide safety nets for the poorest and for the fight against gender-based violence.
  - Maintain low and stable inflation through an effective monetary policy framework: BCC needs to modernize policy instruments and tools, reinforce central bank independence, and strengthen its financial position.
  - Strengthen oversight and regulation of the financial sector: BCC to enhance risk-based supervisory framework, oversight of banks, and modernize/harmonize the regulatory framework.
  - Improve the business environment and reduce regulatory burden: reduce effective taxation, simplify and make predictable interactions with public entities and the judiciary.
  - Step up fight against corruption: reforms and strengthening of judiciary and law enforcement, transparency in use of public resources, accountability for policymakers and authorities, and respect for the rule of law.

### Pre-Requisites for an ECF Arrangement and Sequencing
- Early signals of commitment will be required before approving an ECF arrangement; conditionality should be parsimonious and focused given policy gaps and capacity constraints.
- Key pre-conditions:
  - Adoption of a realistic 2021 budget consistent with macroeconomic stability and restoration of sound PFM practices.
  - Set up the BCC’s Board and management in line with the 2018 BCC Law.
  - Increased transparency in the mining sector given its role as a source of government revenue and export receipts.
- Sequencing and expectations:
  - Expect incremental success; start with limited conditionality and gradually build up given fragmented politics, weak institutions, and widespread corruption.
  - Incremental wins are critical to change societal mindset and engender trust; outreach to stakeholders and clear communication of reform rationale and sacrifices is essential. Civil society and international NGOs are important partners.

### Stepping up Capacity Development and Coordination with other Partners
- Capacity development (CD) is critical to ECF success; CD support from HQ and AFRITAC Central has already been making a difference.
- Governance and safeguard assessments provide comprehensive diagnoses; consider posting resident advisors in key areas to build a roster of highly trained and ethically conscious civil servants.
- Coordination with other donors and CD providers will be actively pursued; staff will closely collaborate and exchange information with partners and debrief the donor community on CD accomplishments.

### Communication Strategy
- Public skepticism is high; communication and outreach are critical and should target civil society, faith-based organizations, academia, politicians, women organizations, and others.
- Major events should have well-organized and coordinated communication to deliver a coherent message. Given depth of issues and public skepticism, candid communication is necessary to preserve credibility.

### Annex II. Main Recommendations of the Governance Report — Key Findings
- Four cross-cutting issues affect economic governance effectiveness: institutional complexity, normative complexity, data integrity and transparency, and checks and balances. Institutional complexity includes blurred roles and responsibilities (e.g., government management of public enterprises through different ministries). Normative complexity derives from unclear legislative rules and regulations. Low transparency is associated with low audit practices and poor financial data and disclosure.
- Fiscal vulnerabilities that may contribute to corruption exist in revenue administration agencies owing to largely manual processes. The exceptional complexity of the Congolese tax system creates incentives for corruption and harms the business environment.
- Scope of the General Treasury account remains narrow; remaining accounts are placed outside it without proper oversight. Standardized public financial management procedures (public procurement and budget execution) are not followed. Low quality and coverage of budgetary reports and financial statements undermines accountability. Oversight and disclosure practices for SOEs are weak.
- The BCC has not yet introduced necessary measures stemming from the 2018 law aimed at increasing autonomy, governance, accountability, and financial transparency.
- Judiciary faces challenges in resources, capacity and independence which undermine its ability to prosecute corruption effectively. The anti-corruption framework is disjointed and lacks key elements. AML/CFT regime presents significant deficiencies and is not compliant with the 2012 FATF standards, as highlighted by the recent GABAC mutual evaluation.
- Institutional framework to combat corruption has considerable shortcomings. Two key agencies overseeing public finances lack a specific mandate to target or investigate corruption. Corruption is pervasive at all levels, though awareness among government officials is growing. Absence of clear oversight of wealth/assets of public officials provides opportunities for corruption with impunity.

### Annex II. Main Recommendations of the Governance Report — Selected Priority Recommendations by Topic
- Public finance:
  - Codify all central levies in a General Tax Code, including all non-tax revenue. (Paragraph 17)
  - Adopt decrees to relaunch assessment of the 2020 tax expenditure assessment for 2018. (Paragraph 17)
  - Rationalize non-tax revenues to reduce their number to the strict minimum by the end of 2023. (Paragraph 17)
  - Rationalization of excise taxes. (Paragraph 17)
  - Reform derogatory regimes (tax exemptions). (Paragraph 17)
  - Launch working group to oversee development of provincial taxation and ETDs to develop an exhaustive code of levies from these governments. (Paragraph 17)
  - Review special accounts, eliminate duplicative accounts, and entrust remaining collections to tax agencies by the end of 2020. (Paragraph 17)
  - Complete inventory of organizations with annexed budgets and supervise their revenue practices. (Paragraph 17)
  - Eliminate the strategic partnership regime for value chains and all conventions/agreements that include tax exemptions, except those in current codes.
  - Conduct census and unification of payroll and public service files. (Paragraph 19)

- Revenue collection:
  - Implement short-term measures proposed by the mission in terms of fiscal information publication, improvements of the appeals process, upgrading of reporting and payment procedures, and improvements of the resource management framework. (Paragraph 19)
  - Develop a strategy to digitize main procedures, modernize HR management, and strengthen internal control and monitoring.

- Public financial management:
  - Extend coverage of the TGA to all central government operations by funneling central and local revenue and parafiscal taxes into the TGA open at the central bank; secure critical liquidity on sequestered BCC sub-accounts (VAT refunds, provisions for risks, precautionary cash); and operate the extended TGA under current conditions. (Paragraph 19)
  - Carry out accounting reform to professionalize treasury and accounting functions. (Paragraph 19)
  - Restore normal expenditure procedures. (Paragraph 19)

- Extractive sector:
  - Create a beneficial ownership registry.
  - Ensure full consultation of any decree defining beneficial ownership.
  - Ensure disclosure requirements on joint venture contracts and revenue projections.

- State-Owned Enterprises (SOEs):
  - Assess rationale for state ownership.
  - Introduce accountability triggers for SOE performance contracts.
  - Follow up on auditors' qualified opinions.
  - Develop a monitoring system for public policy obligations.
  - Invigorate functions of the State Auditor on budget allocation and assess need for additional magistrates to support the State Auditor mandate.
  - Identify and raise corporate governance standards for strategically important SOEs.
  - Publication of financial statements of SOEs. (Paragraph 27)
  - Conseil Supérieur du Portefeuille (CSP) to provide timely annual aggregate reporting for the SOE portfolio.
  - Comprehensive publication of mining, oil, and gas contracts, in particular contracts involving transactions between state-owned entities and private companies or between private parties and the Congolese state directly. (Paragraph 27)
  - Legally expand the perimeter of the Ministry of Portfolio oversight to include indirect state participations.

- Rule of Law:
  - Establish a publicly accessible central repository of updated laws and regulations.
  - Create a digital property register to address loss or falsification of property documents.
  - Publish all court decisions.
  - Conduct proper investigations of and impose sanctions on magistrates/judges who abuse office for personal gain and publicize investigations and sanctions.
  - Strengthen supervision of notaries to fully protect property owners.

- Anti-corruption framework:
  - Engage in the first cycle of the UNCAC review mechanism. (Paragraph 25)
  - Criminalize acts of corruption in line with the United Nations Convention Against Corruption. (Paragraph 25)
  - Establish and operationalize an independent anti-corruption agency. (Paragraph 25)
  - Eliminate presumed immunity for public officials by abolishing immunity and the approval process needed to lift such immunity (National Assembly/Senate) to enable the Public Prosecutor to carry out its work.
  - Enact a robust asset declaration law to give effect to Article 99 of the DRC constitution. (Paragraph 26)
  - Confiscate proceeds of crime and assets of equivalent value, focusing on identification, location and tracing of existing asset values associated with an offence.

- Market regulation & business environment:
  - Ensure full operationalization and sustainability of the guichet unique and for bureaus/antennas to become financially autonomous. (Paragraph 17)
  - Create a central registry of collaterals across the banking sector.
  - Create a Companies Registry database linked with business registration platform where companies file annual accounts and data are maintained in a usable format.
  - Implement ASYCUDA World in the electronic single window involving all stakeholders. (Paragraph 17)

- Financial Sector Oversight:
  - Implement upgraded regulations on banks’ governance, internal controls and risk management. (Paragraph 22)
  - Continue work on adoption of risk-based supervisory processes and practices. (Paragraph 22)
  - Address corrective action disclosure and powers. (Paragraph 22)
  - Continue working with AFC to improve implementation of licensing requirements. (Paragraph 22)

- AML (Anti-Money Laundering) and related measures:
  - Amend the AML/CFT Law and related regulations to ensure compliance with the FATF standard. (Paragraph 26)
  - Implement a comprehensive asset declaration framework to strengthen measures for politically exposed persons (PEP). (Paragraph 26)
  - Strengthen the CRF with resources and independence to carry out its mission.
  - Strengthen supervision of financial institutions by developing risk-based supervision, particularly for banks.
  - Issue guidance on AML/CFT recommendations and encourage banks to file suspicious activity reports (including money laundering typologies related to the extractive sector).
  - Revise legal framework applicable to legal persons and arrangements in line with the FATF standard. (Paragraph 26)
  - Implement a mechanism to ensure competent authorities can obtain adequate, accurate and current beneficial ownership information on legal persons and arrangements in a timely manner.
  - Define a penal policy oriented at suppressing ML and its underlying predicate crimes, supported by parallel financial investigations focusing on main risks identified in the NRA.
  - Develop a procedural manual for international cooperation clarifying processes, priorities, timeframes and levels of confidentiality for MLA requests.
  - Create within the office of the Public Prosecutor at the Court of Appeal a dedicated unit for international cooperation to track and manage MLA requests, including those related to ML/TF.
  - Sign bilateral agreements and formalize international cooperation with countries sharing informal channels for information exchange, prioritizing those with heightened ML/TF risks.

*IMF staff summary based on Annex I and Annex II of the provided DRC Country Engagement Strategy documents.*

### Annex III. COVID-19—Health Impact and Policy Response

### Annex III. COVID-19—Health Impact and Policy Response

### Health impact and epidemiology
- 40,254 confirmed cases and 916 deaths as of late June 2021, with a large majority of cases concentrated in the capital city of Kinshasa.
- First COVID wave in Spring 2020: lockdown imposed in Gombe (business district of Kinshasa).
- Industrial mining sites in Katanga and Lualaba provinces: placed in severe lockdown throughout the pandemic with workers banned from leaving the compound; agreement with mining companies reached in July to lift the most stringent measures.
- Second COVID-19 wave: government announced new restrictions in December 2020, including establishment of a curfew, the obligation of wearing a mask, and compulsory COVID testing for domestic and external travelers.
- Early June 2021: a third wave of COVID-19, with Kinshasa as its epicenter, was officially announced by the health authorities.

### Vaccination rollout
- First shipment: 1.7 million doses of the COVID-19 vaccine arrived at Kinshasa in early March 2021 as part of COVAX supplies.
- Vaccination goal for the first stage: cover 20% of the population, including health workers, people aged over 55, or suffering from serious health conditions.
- Operational constraint: fear of side effects and mistrust of the population have delayed the launch of the vaccination campaign.

### Other concurrent health crises
- Since 2018, DRC has battled four Ebola outbreaks.
  - 2018 South Kivu outbreak: 3,470 cases and 2,299 deaths (the world’s second largest Ebola outbreak on record).
  - Equateur outbreak started in June 2020 and was declared over in November 2020 due to timely mobilization of vaccines and treatments.
- Measles: response to COVID has interfered with vaccination campaigns; measles has spread to every province and caused more deaths than the recent South Kivu Ebola outbreak.

### Preparedness, response plan, and objectives
- A preparedness and response national plan designed with development partners with a US$135 million budget (or 0.3 percent of GDP).
- Plan coordination: led by Dr. Muyembe (who led response to the 10th Ebola outbreak).
- Plan aims:
  - Strengthening early detection, surveillance, and enhancing technical and operational coordination within the government.
  - Improving the quality of medical care.
  - Developing effective preventive communication.

### Fiscal measures adopted (selection)
- A three-month VAT exemption on pharmaceutical products and basic goods.
- Suspension of tax audits for companies.
- A grace period for businesses on tax arrears.
- Full tax deductibility of any donations made to the COVID relief fund.
- Provision of water and electricity for a period of two months, free of charge.
- Prohibition to evict renters in case of nonpayment of financial obligations from March to June 2020.
- Suspension of VAT collection on the production and on the sales of basic goods.

### Monetary and financial sector measures by the BCC
- In March 2020, measures to ease liquidity:
  - Reducing the policy rate by 150 bps to 7.5 percent.
  - Eliminating mandatory reserve requirements on demand deposits in local currency.
  - Creating a new collateralized long-term funding facility for commercial banks of up to 24 months to support the provision of new credit for the import and production of food and other basic goods.
- Additional measures and actions:
  - Deferred the adoption of new minimum capital requirements.
  - Encouraged the restructuring of NPLs.
  - Promoted the use of e-payments.
- In 2020, in order to re-anchor inflation expectations and maintain a positive in real terms policy rate:
  - The BCC increased its policy rate to 18.5 percent.
  - Undertook a limited US$25 million foreign exchange intervention to help stem depreciation pressures.

*Source: Annex III. COVID-19—Health Impact and Policy Response*

### 2. Political instability and weak institutional governance are the main risks by

### 2. Political instability and weak institutional governance are the main risks

### Main risks and implications
- Political instability and weak institutional governance complicate the actual delivery of technical assistance (TA) and undermine ownership of associated reforms.
- Commitment and capacity to implement TA recommendations will need to be regularly monitored.
- Sustained engagement with the new authorities will be required to agree on TA plans and key objectives and to increase the potential return of the Fund’s CD activities.

### Authorities’ identified capacity development (CD) needs
- The authorities agreed on the identified focus areas for CD support from the Fund and are seeking assistance in:
  - Developing guidance notes on issues related to budget processes and fiscal data compilation.
  - Organizing a seminar for members of parliament and senators on budget credibility and PFM.
  - Reinforcing banking supervision.
  - Strengthening central bank reporting and control processes, monetary policy implementation & instruments.

### Letter of Intent — key economic and program facts
- Request for IMF financing:
  - The Government requests financing under the Extended Credit Facility in the amount of SDR 1,066 million, corresponding to 100 percent of quota, over a three-year period.
- COVID-19 economic impact and response:
  - GDP estimated to have grown by only 1.7 percent in 2020 despite the expansion of the extractive sector by almost 10 percent.
  - The pandemic led to a sharp deceleration of non-mining economic activity; non-mining sector estimated to have contracted by about 1.3 percent in the entire year.
  - The extractive sector expanded by 9.7 percent.
  - The economy suffered from central bank advances to the government and a sharp increase in inflation in parallel with a quick depreciation of the Congolese franc.
  - A Stability Pact signed between the central bank and the government’s economic team, together with the disbursement under the Rapid Credit Facility in April 2020, critically helped stabilize conditions.
- Emergency and mitigation measures:
  - On March 21, 2020, the President declared the state of health emergency (which ended in July 21), complemented by regulatory measures such as temporary border closures, quarantines and systematic testing of travelers, restrictions on public events, and temporary lockdowns (notably in Gombe).
  - Emergency multi-sectoral response plan prepared with a US$135 million budget (0.3 percent of GDP).
  - Specific measures included targeted health spending, fiscal measures (targeted tax relief and deadline extensions), and BCC support to ease liquidity issues in the financial sector.
- Fiscal and monetary outcomes:
  - Overall fiscal deficit of the central government reached 2.1 percent of GDP in 2020 versus a 0.6 percent deficit anticipated at the time of the SMP’s approval.
  - BCC provided advances to the government equivalent to about 0.3 percent of GDP through April 2020.
  - Inflation peaked at 15.7 percent year-on-year in August 2020.
  - Following the RCF budget support disbursement in April 2020, the BCC, the Ministry of Finance and the Ministry of Budget signed a stability pact and monetary policy was substantially tightened; inflation slowed and exchange rate pressures eased in the second half of 2020.
  - Early RCF support: US$363 million (0.7 percent of GDP) approved in April 2020 and directed to the budget.
  - BCC international reserves fell from US$730 million at end-2019 to US$709 million at end-2020, equivalent to less than 2 weeks of imports.
- Social and structural context:
  - The DRC remains extremely fragile after decades of recurrent humanitarian and political crises; conflicts in the 1990s caused, directly or indirectly, more than 5 million deaths.
  - The country hosts more than half a million refugees and five million internally displaced people (IDPs), the largest IDP population in Africa.
  - Real per capita income dropped from above US$1,100 in 1990 to about US$500 today.
  - More than two thirds of the population live in extreme poverty on less than US$1.90 a day.
  - The country has at least 80 million hectares of arable land of which less than 10 percent are used.
- Debt service and DSSI:
  - The authorities requested temporary debt service suspension from official bilateral creditors under the Debt Service Suspension Initiative (DSSI) and committed to use freed resources under the DSSI for COVID-19 health spending and mitigating measures, and to closely monitor and report on the use of COVID-19 resources.

### Program performance, assessments, and objectives
- Performance under the Staff Monitored Program (SMP):
  - Met all the indicative targets (ITs) for the end-December 2019 test date, except the ceiling on contracting or guaranteeing of new non-concessional external debt due to financing of a development project for N'Djili International Airport.
  - Missed several ITs for March and May 2020 test dates (including the floor on the fiscal domestic balance on a cash basis, and the ceiling on net financing from the BCC to the government) because of the pandemic, but implemented corrective actions.
  - Implemented all structural benchmarks (SBs) except restoration of VAT on imports by mining companies due to legislative constraints.
  - Published 146 mining contracts out of a list of 162, including all the critical ones highlighted by civil society.
  - Implemented corrective actions including an inter-ministerial decree to strengthen public debt management and a stability pact ruling out BCC advances to finance the fiscal deficit.
- Key assessments and TA:
  - Governance and safeguards assessments in December 2019 and February 2020 provided recommendations and prioritized reforms.
  - Extensive technical assistance strengthened institutional capacity to implement a program supported by the IMF.
- Program objectives supported by the ECF arrangement:
  1. Step up domestic revenue mobilization to increase fiscal space for the financing of much needed investment and social spending.
  2. Strengthen governance, including natural resource management and transparency and the anti-corruption framework.
  3. Strengthen monetary policy and financial stability, including by improving the central bank’s independence.
- Budget and medium-term outlook:
  - The 2021 budget law was based on credible revenue and financing assumptions and was more realistic than the 2020 Finance Law.
  - An ECF arrangement over three years is expected to help address balance of payments needs, catalyze external project and budget support, and attract foreign private investment.

*Source: Democratic Republic of the Congo — Letter of Intent and Memorandum of Economic and Financial Policies (June 28, 2021).*

### 14.      In line with the program baseline scenario, we expect economic growth to rebound in

### 1codea2021002 - 14.      In line with the program baseline scenario, we expect economic growth to rebound in

### Economic outlook and growth projections
- Forecast GDP growth to rebound to 4.9 percent in 2021 fueled by strong mining production and a partial recovery of the non-mining sector.
- Medium-term expectation: an acceleration of GDP growth to near 6 percent.
- Current account deficit (including transfers) stabilizing at around 1.3 percent of GDP in the medium term.
- BCC foreign exchange reserves at about two weeks of imports’ coverage initially; expected to increase to more than 5 weeks of imports by the end of the program.

### Program fiscal framework and monetary safeguards
- Fiscal anchor: overall fiscal deficit (cash basis) of about 1 percent of GDP per year over the medium-term; this will be the Quantitative Performance Criterion (QPC).
- Commitment to refrain from any central bank financing of the budget (direct or indirect), enforced through:
  - a QPC with a zero ceiling on changes in net central bank credit to the government; and
  - a QPC with a ceiling on the BCC’s net domestic assets.
- Commitment to provide detailed information on payments related to existing secured loans, on the terms of such loans and on related guarantees.

### External financing and debt policy
- Stock of external public debt at about 14 percent of GDP.
- Risk of debt distress assessed as moderate due to low fiscal revenue and volatile export receipts.
- Strategy: rely mostly on grants and concessional loans; newly contracted public debt will favor loans on concessional terms.
- Limited consideration for some long-term non- and semi-concessional borrowing for critical expenditure needs.
- Commitment to maintain a ceiling on contracting or guaranteeing new non-concessional external debt by the central government (set as a QPC).
- Commitment to avoid any external arrears (QPC).
- Commitment to strengthen collection and reporting of debt-related data from SOEs.

### Reserves, SDRs, and contingency planning
- ECF-supported policies expected to add buffers to very low official reserves and allow accumulation of some government deposits at the BCC over the medium-term.
- Adoption of a new reserve requirement framework for foreign currency deposits and more active international support expected to help raise reserves.
- Note of a potential SDR allocation that could materialize by end August 2021; use of allocation to be discussed during the first ECF review.
- Adverse scenario risks: delayed recovery from the pandemic, need for more containment, or a sudden drop in mining prices — could reduce growth in 2021, weaken external demand, lower externally-financed public investment, and create an additional fiscal gap absent policy action.
- Contingency response to adverse scenario: budgetary savings by reducing lower priority spending while preserving social spending and priority domestically-financed investment.
- Favorable scenario: higher mineral prices and early reforms could increase government revenues above baseline assumptions; in that case, consideration of additional spending in priority areas while respecting public deficit objectives.

### Structural reforms — Fiscal reforms and revenue mobilization
- Medium-term objective: gradually increase the revenue-to-GDP ratio; intermediate objective to increase the tax revenue to GDP ratio by 3.5 percentage points towards 12.2 percent of GDP by 2023 (monitored by an indicative target).
- VAT reforms:
  - Set up a self-liquidating VAT system for imports from mining companies starting end-March 2021.
  - Revise the related decree instruction to apply to mining companies as a whole.
  - IGF to carry out an audit limited to certification of VAT arrears to mining companies, to be finalized by December 2021; Ministry of Finance to give instruction for this audit by August 2021.
  - Review VAT liability criteria within structural reform of the DGI.
- Revenue administration modernization:
  - Strengthen governance of the three main revenue administrations and ascertain taxpayer rights.
  - Continue computerization projects supported by Agence Francaise de Developpement and the European Union; commit to finance recurring costs and encourage users to adopt new software (ISYS-Régies, data warehouse, LOGIRAD).
  - Implement ASYCUDA World in the electronic single window at all custom offices, starting with 10 offices by end-2021; this would bring total offices with ASYCUDA World to 77 out of 117 offices representing more than 95% of the country's customs revenue in 2020.
  - Excise duty traceability system (STDA) expected to start yielding results in 2022.
  - Strengthen performance via equitable distribution of revenue administration bonuses, performance contracts, and individual performance evaluation.
  - Adopt a decree revising framework and organic structures of the three tax administrations to strengthen internal audit and establish accounting network of financial administrations.
- Tax expenditures and exemptions:
  - Estimated tax exemptions at about 22 percent of central government revenue in 2017.
  - Continue to estimate and publish costs yearly; publish report on tax expenditures for 2019 and 2020 by end-2021.
  - Finalize a rationalization plan by end-2021; reform preferential tax regimes and related concessions.
  - Reform high de facto threshold for daily import for personal use to prevent import fractioning and duty avoidance.
- Non-tax charges and parafiscal charges:
  - Compile legal provisions on non-tax revenue in a single document by September 2021.
  - Prior assessment of non-tax charges by end-December 2021; government to adopt rationalization plan by March 2022.
  - Seek IMF technical assistance.
  - Inventory all parafiscal deductions from special accounts and budgets by June 2022 with view to rationalize from December 2022.
  - Excise duties to be refocused and rates slightly adjusted to compensate revenue effects.

### Reducing fiscal risks and improving spending quality
- Publish a yearly statement on fiscal risks and introduce a fiscal risk management function with IMF technical assistance; statement to include information on:
  - (i) macroeconomic risks; (ii) risks associated with public debt; (iii) risks associated with public sector entities other than the State; (iv) risks related to the financial sector; (v) institutional risks; and (vi) long-term risks, notably related to climate change.
- Publish the fiscal risk statement as an annex to the Medium-Term Budget Framework (CBMT) for 2022-2024 and plan to annex to initial finance laws in future.
- Establish a dedicated committee for coordination and a decree on fiscal governance to regulate organizational modalities.
- Limit non-priority spending to increase fiscal space; streamline the wage bill by consolidating wage payment systems, reviewing bonuses and eliminating ghost workers.
- Improve fuel price structure in consultation with the oil industry by end of August 2021; recruit an independent firm by December 2021 to audit charges of oil commercial and logistics companies.
- Commit to publish certification report of stock of arrears to commercial companies and include planned repayments in the 2022 budget; regularize 2021 payments in the 2021 revised budget law.
- Gradually reform civil servants’ pension system to control transfers and ensure long-term sustainability.
- Commit to limit use of emergency procedures (IT) and restore proper use of expenditure chain.

### Social spending and security transition priorities
- Define an IT with a floor on social spending for key targeted projects under the ECF arrangement.
- Social priorities include:
  - Education: pursue free education, regularize teachers, and strengthen infrastructure.
  - Health: ensure health spending in three critical areas (IT): (i) child and mother prevention; (ii) traditional vaccination; and (iii) HIV, malaria and TB prevention. Commitment to ensure regular share of funding, as in 2020 payment of US$16 million to the GAVI and of US$17 million in 2021.
  - Security/peace: structured dialogue with the United Nations and joint working group to establish a transition plan for MONUSCO withdrawal; allocate resources to consolidate State authority, implement DDRC strategy, pursue FARDC and PNC reform, ensure workforce management, improve protection of civilians, respond to humanitarian needs, resolve root sources of conflicts and foster inclusive development.

### Public investment management and public financial management (PFM)
- Scale-up of public investment to be accompanied by better prioritization and execution; undertake a Public Investment Management Assessment (PIMA) with IMF TA.
- PFM reform strategic plan to be adopted by the Government by the end of 2021, focusing on:
  - Reinforcing budgetary credibility through improved inter-institutional coordination, macroeconomic framework formulation, and forecast of budgetary resources.
  - Enhancing treasury management via stronger institutional framework, enhanced treasury plans, and inventory/consolidation of government accounts to set up the general treasury account at the BCC.
  - Reinforcing the expenditure chain and limiting use of emergency procedures; produce quarterly reports on derogatory procedures starting with Q3 2021, to be published by end-2021.
  - Strengthening financial reporting and oversight (including for state-owned enterprises).
  - Strengthening public debt management; inter-ministerial decree signed on December 5, 2020 mandating the Public Debt Directorate to evaluate and monitor all new debt contracts and enforce debt reporting from SOEs.
  - Strengthening public procurement by favoring open tenders.
  - Restoring State accounting function through creation of the DGTCP.

### Transparency, COVID-19 spending, and procurement reforms
- Steps taken to publish budget execution figures and specific information on COVID-19 spending from the April 2020 RCF disbursement.
- Publication status as of June 23, 2021:
  - Published 32 contracts totaling US$6.7 million out of 35 identified contracts; three remaining contracts to be published in coming days.
- Commitment to publish all contracts in government possession, including decentralized entity spending.
- Request IMF technical assistance to improve transparency and align beneficial ownership disclosure with best practices.
- Commitment to adopt, by end-September 2021, amendments to procurement regulatory framework to require:
  - (i) bidders to submit beneficial ownership information; and
  - (ii) publication of such beneficial ownership information by the procurement agency on an easily accessible website for all awarded contracts above USD 12,000.
- A specific audit of COVID-19 related expenditures is ongoing as part of the annual control by the Audit Court; commit to publish the audit soon after presentation to Parliament in September 2021.

*Source: 1codea2021002 - 14. In line with the program baseline scenario, we expect economic growth to rebound in*

### 29.      Improved governance and the fight against corruption are central in our strategy.

### 1codea2021002 - 29.      Improved governance and the fight against corruption are central in our strategy.

### Governance and anti-corruption
- Comprehensive governance assessment conducted in December 2019; a governance strategy plan will be prepared by a special committee formed by the prime minister.
- Strengthen the Anti-Corruption Prevention Agency (APLC), operational since July 2020, in line with the United Nations Convention Against Corruption (UNCAC) and international best practices.
- Commit to commence the first cycle of the UNCAC review mechanism and to criminalize acts of corruption in line with UNCAC.
- Ensure the independence of the Audit Court and the Finance Inspectorate General and devote sufficient resources for the efficiency of their work.

### Transparency in the mining sector
- Continue publishing all new contracts (continuous structural benchmark).
- Strengthen EITI implementation:
  - Appointed a new coordinator of the national EITI committee through a transparent process.
  - Regularized budgetary transfers to the national EITI committee.
  - Adopted and published a progress report on 2018, 2019 and first semester 2020 on the EITI DRC website.
  - Executive committee validated on March 16, 2021 a three-year work plan for 2021-23 that was formally adopted by government on June 4th (prior action).
- Audit and publish the financial statements of mining SOEs; Publish the full 2020 financial statements of Gecamines, including auditor's comments (First Review prior action: End-August 2021).

### AML/CFT and asset-declaration reforms
- By end-October 2021: submit amendments to the AML/CFT Law and related regulations to meet global standard recommendations, including:
  - banning of anonymous bank accounts;
  - stronger customer due diligence measures with wire transfers;
  - establishing basic correspondent banking customer due diligence requirements.
- By end-October 2021, and in line with Article 99 of the Constitution: submit to Parliament amendments to the asset declaration framework to strengthen the effectiveness of politically exposed persons (PEP) measures.

### Business climate and judiciary
- Priorities to boost private investment:
  - Streamline multiplicity of levies and implement a fair and predictable tax collection system.
  - Improve functioning of the judiciary system, resolution of commercial disputes, and enforcement and protection of property and contractual rights.
- Recognize excessive regulation as a constraint on costs and competitiveness.

### Environment and climate financing
- DRC has the second largest tropical massif in the world, spread over 155 million hectares of forests.
- Country also has large expanses of peatlands and strategic minerals necessary for ecological transition.
- Government intends to mobilize public, private, multilateral and bilateral funding and to set up a National Climate Fund to channel resources to projects that preserve the environment.

### Monetary policy framework modernization
- Objective: maintain low and stable inflation while gradually modernizing the BCC’s monetary policy framework.
- Continue using monetary aggregate targets as main nominal anchor for the medium-term while adopting new instruments and tools.
- Structural benchmarks to be adopted by December 2021:
  - Adoption of a regulation on the new reserve requirement framework in the same currency of deposits.
  - Signature of a MoU between the BCC and the Ministry of Finance to regularize the outstanding credit of the BCC to the government.
- Continue to ban any direct advance by the BCC to finance the public deficit (in accordance with the Stability Pact).
- Ban on granting new guarantees from the BCC to the private sector (documentary credits, CREDOCs, any other guarantee or advance of that type); plan for gradual elimination of existing operations to restore the BCC's international reserves.
- Plan to develop a FPAS (Forecasting and Policy Analysis Systems) quantitative model tailored to DRC features; continue relying on Fund technical assistance.

### Central Bank governance, safeguards, and accounting
- Commit to implement recommendations of the 2020 safeguards assessment.
- With the new BCC Board set up in accordance with the 2018 BCC Law (prior action), accelerate implementation of key recommendations:
  - develop a compliance function;
  - strengthen capacity and oversight of the Audit Committee;
  - adopt plan towards the adoption and implementation of IFRS accounting framework.
- Reinforce ex-ante controls and reporting practices by:
  - using a monitored account at the BIS for Fund disbursements;
  - validating QPCs and transactions on the BIS-monitored account at test dates by external auditors;
  - providing monthly statements of the BIS account to the IMF.
- Reinforce BCC financial autonomy by restructuring government debt with the BCC and implementing parliament-approved recapitalization plans.

### External position and international reserves
- Gross official FX reserves of the BCC expected to reach about US$1.3 billion by end 2021 (close to 3.5 weeks of imports) and about 6 weeks of imports by end 2024.
- Measures to boost FX reserves include ECF disbursements, implementation of the new reserve requirement regulation, and transfer abroad of available FX deposits in local commercial banks.
- Given very low FX reserves and the role of the exchange rate as shock absorber, minimize the use of FX interventions to continue building adequate international reserves.

### Financial sector oversight, legislation, and inclusion
- Strengthen risk-based supervisory framework and oversight of banks; apply best practices of appropriate supervision and regulatory measures during the pandemic with Fund technical assistance.
- Adopt required measures and enforcement powers to recapitalize vulnerable banks; apply best resolution options to failed banks if necessary (to be discussed with the Fund).
- Submit the new Commercial Banking Law to Parliament that includes IMF staff’s comments by end-November 2021 (structural benchmark).
- Requested a Financial Sector Stability Review (FSSR) planned for 2021 to provide a detailed diagnostic and TA priorities.
- Financial inclusion:
  - At least two-thirds of the adult population have no access to financial services.
  - Credit to the private sector is below 10 percent of GDP.
  - Strategy includes supporting mobile money and other fintech services, restructuring and strengthening microfinance institutions (MFIs), reducing vulnerability to cyber risks, and promoting financial education (especially in local currency).

### Program monitoring, data, and technical assistance
- Value Fund technical assistance; TA has been instrumental in diagnostics supporting reform plans and expected to continue.
- Commit to allocate resources to production of statistics and support the National Institute of Statistics.
- Priorities: improve debt data collection (especially on SOEs); enhance quality and frequency of BCC data reporting; strengthen accuracy of indicators for the real sector, balance of payments, and fiscal variables.
- Program evaluation based on quantitative performance criteria (QPCs) and structural benchmarks with semi-annual reviews.
  - First and second reviews scheduled on or after September 15, 2021 and March 15, 2022 respectively, based on test dates end-June 2021 and end-December 2021.
  - Monitoring by a technical troika chaired by the Finance Ministry and comprising the Budget Ministry and the BCC; CTR to serve as secretariat and share reporting with IMF staff.
  - Monetary QPCs and transactions on the BIS-monitored account at test dates to be validated by the external auditors of the BCC.

### Selected quantitative and timetable highlights from program documents
- Forest area: 155 million hectares.
- APLC operational since July 2020.
- Expected BCC gross official FX reserves: about US$1.3 billion by end 2021; about 3.5 weeks of imports by end 2021; about 6 weeks of imports by end 2024.
- Financial inclusion: at least two-thirds of adults with no access to financial services.
- Credit to the private sector: below 10 percent of GDP.
- Deadlines and dates:
  - Governance assessment: December 2019.
  - EITI work plan validated: March 16, 2021; adopted by government: June 4, 2021 (prior action).
  - Publish full 2020 financial statements of Gecamines: End-August 2021 (First Review prior action).
  - Consolidate non-tax revenues legal documents: End-September 2021 (First Review).
  - Submit new Commercial Banking Law to Parliament (with IMF comments): End-November 2021 (First Review structural benchmark).
  - Adopt new reserve requirement regulation and sign MoU regularizing BCC outstanding credit to government: End-December 2021 (Second Review structural benchmarks).
  - Fully implement ASYCUDA World in the electronic single-window at 10 additional custom offices: End-December 2021 (Second Review).
  - Propose detailed plan to rationalize non-tax revenues to government: End-March 2022 (Second Review).

*Source: Excerpt from the Democratic Republic of the Congo Memorandum of Economic and Financial Policies and Technical Memorandum of Understanding (TMU).*

### introduction or modification of multiple currency practices; (iii) non-conclusion of bilateral payments

### 1codea2021002 - introduction or modification of multiple currency practices; (iii) non-conclusion of bilateral payments

### Continuous QPCs (Quantitative Performance Criteria)
- Continuous QPCs include: introduction or modification of multiple currency practices; non-conclusion of bilateral payments agreements that are inconsistent with Article VIII; non-imposition or intensification of import restrictions for balance of payments reasons.
- These continuous QPCs are not listed in the QPC table annexed to the MEFP owing to their non-quantitative nature.

### Quantitative performance criteria and adjustors — Net International Reserves (NIR) of the BCC
- Definition: NIR = BCC gross foreign reserves − total foreign liabilities of the BCC.
- Gross foreign reserves (BPM6-consistent) comprise:
  - (i) monetary gold holdings of the BCC kept abroad;
  - (ii) SDR holdings kept abroad;
  - (v) receipts in foreign currency; and
  - convertible claims on nonresidents, such as foreign deposits and foreign securities.
- Excluded from gross foreign reserves: any other claims on residents in foreign exchange, nonconvertible currency holdings, foreign reserves that are encumbered or pledged (including reserve assets used as collateral or security for foreign third-party liabilities), and swap transactions.
- Total foreign liabilities: all BCC foreign exchange liabilities to nonresidents, including the IMF and SDR allocations of the BCC.

Adjustments to NIR floors:
- Balance of payments support (BPS): NIR floors adjusted upward by an amount equivalent to 50 percent of total BPS in excess of the programmed levels. No downward adjustments for BPS shortfalls.
- External debt service payment: NIR floors adjusted (i) upward by an amount equivalent to under payment of external debt service relative to programmed amounts; and (ii) downward by an amount equivalent to the excess of external debt service payments relative to programmed amounts.
- Privatization proceeds in convertible currencies (PPCC): NIR floors adjusted upward by 50 percent of total PPCC in excess of the programmed levels. No downward adjustment for shortfalls.

Definitions:
- BPS: all disbursed foreign grants and loans to the central government, excluding those tied to projects.
- External debt service payments (central government): interest and principal due to foreign creditors (excluding the IMF).

### Ceilings on changes in Net Domestic Assets (NDA) of the BCC
- Definition: NDA = narrow base money − net international reserves − external assets excluded in NIR.
- NDA components include:
  - (i) net credit to the central government;
  - (ii) credit to the private sector;
  - (iii) credit to public enterprises;
  - (iv) credit to commercial banks;
  - (v) other claims on the rest of the economy; and
  - (vi) other net assets.
- Narrow base money = sum of:
  - (i) currency in circulation;
  - (ii) cash holdings by banks;
  - (iii) bank deposits held with the BCC;
  - (iv) nonbank private sector deposits held with the BCC;
  - (v) public enterprises deposits held with the BCC.

Adjustments to NDA ceilings:
- BPS: NDA ceilings adjusted downward by an amount equivalent to 50 percent of total BPS in excess of the programmed level. No upward adjustment for BPS shortfalls.
- External debt service payment: NDA ceilings adjusted (i) downward by an amount equivalent to under payment of debt service relative to programmed amounts; and (ii) upward by an amount equivalent to the excess of external debt service payments relative to programmed amounts.
- Statutory reserve requirements for foreign currency deposits: NDA ceilings adjusted upwards (downwards) by the increase (decrease) in the statutory reserve requirements for foreign currency deposits relative to program projections (memorandum item).
- Privatization proceeds: NDA ceilings adjusted downward by 50 percent of the total amount of privatization proceeds (including PPCC) in excess of the programmed level. No upward adjustment for shortfalls.

### Ceiling on changes in Net Central Bank Credit to the Central Government (NCG)
- Definition: NCG = gross BCC claims on the central government − central government deposits at the BCC. Central government deposits related to externally financed projects are excluded.
- Excluded items: Perpetual government securities that cover past operating losses, unsecuritized operating losses from 2011 and later years, unpaid interest payments for securities linked to operating losses of the BCC, and foreign currency translation losses.
- All foreign currency denominated flows to the budget are converted to domestic currency using the market exchange rate prevailing at disbursement.

Adjustments to NCG ceilings:
- BPS: NCG ceilings adjusted downward by 50 percent of total BPS in excess of the programmed level. No upward adjustment for BPS shortfalls.
- External debt service payment: NCG ceilings adjusted (i) downward by under payment of debt service relative to programmed amounts; and (ii) upward by excess of external debt service payments relative to programmed amounts.
- Privatization proceeds: NCG ceilings adjusted downward by 50 percent of total privatization proceeds (including PPCC) in excess of the programmed levels. No upward adjustment for shortfalls.

### Floor on the Domestic Fiscal Balance (cash basis)
- Definition: Domestic fiscal balance = (domestic revenue) − (domestically financed expenditure).
  - Domestic revenue = (total revenue and grants) − (grants).
  - Domestically financed expenditure = (total expenditure) − (externally financed investments (loans and grants)) − (foreign interest payments) + (net accumulation of domestic arrears).
- Adjustments for privatization proceeds:
  - Floors adjusted (i) upward by an amount equivalent to the full shortfall of privatization relative to programmed levels; (ii) downward by 50 percent of the total amount of privatization proceeds in excess of the programmed levels.

### Ceiling on the Accumulation of External Payment Arrears
- Definition: External payment arrears = external debt service obligations (principal and interest) of the central government not paid on the contractual due date.
- The ceiling on new external payment arrears is continuous during the ECF arrangement and does not apply to arrears in renegotiation or when creditor has agreed to suspension pending negotiations.
- The government will immediately report any new external arrears to IMF staff.

### Ceilings on Non-concessional External Debt Contracted or Guaranteed by the Public Sector
- Public sector: central government, local governments, the central bank (BCC), state-owned enterprises (only GECAMINES, SNEL, and MIBA are included in the QPC), decentralized territorial entities and public entities controlled and financed by the central government.
- Debt definition: as set out in Executive Board Decision No. 6230 (79/140) Point 9, revised August 31, 2009 (Decision No. 14416-(09/91)). External debt is contracted when all parties signed the debt contract. External debt measured on a gross basis using residency criterion.
- Concessional debt: grant element ≥ 35 percent. Grant element = (nominal value − PV of debt) / nominal value. PV calculated at contracting by discounting future debt-service payments using currency-specific CIRRs published by the OECD.
  - For debt maturity ≥ 15 years: ten-year-average CIRR used.
  - For debt maturity < 15 years: six-month average CIRR used.
  - Margins added to averages: 0.75 percent for repayment periods < 15 years, 1 percent for 15 to 19 years, 1.15 percent for 20 to 29 years, and 1.25 percent for 30 years or more.
- Coverage/exclusions of the ceiling: applies to contracted or guaranteed external debt by the public sector for which equivalent value has not been received. Excludes:
  - (i) use of Fund resources;
  - (ii) debts incurred to restructure, refinance, or prepay existing debts to the extent incurred on more favorable terms (including grant element higher than 35 percent);
  - (iii) concessional debts;
  - (iv) normal import credits with maturity up to one year.
- Guarantee of a debt: arises from explicit legal obligation of the public sector to service a debt in event of nonpayment or from implicit legal/contractual obligation to finance shortfalls.

### Indicative targets and other monitored items
- Ceiling on variation of deposits used as Collateral/Guarantee by the BCC for Central Government loans: covers central government loans guaranteed by the BCC and liabilities secured by liens over BCC deposits in local or foreign currency.
- Floor on central government revenues:
  - Defined in line with GFSM 2001 on a cash basis, excluding grants.
  - Revenues include taxes, compulsory transfers, property income, sales of goods and services, social contributions (excluding pensions contributions received by the central government), interest, fines, penalties, forfeits, and voluntary transfers from nongovernment other than grants.
  - Excludes grants, receipts from sale of nonfinancial assets (e.g., privatization and signature bonuses), transactions in financial assets and liabilities (such as borrowing, except interest payments), transfer of profits from BCC to the Treasury, and revenues of special accounts and budgets.
  - Revenues recognized on a cash basis; exceptional advanced payments treated as if received on the normal due date.

- Floor on Social Spending (excludes wages). Social spending monitored includes:
  - Reproductive, Maternal, Neonatal, Child and Adolescent Health (RMNCAH) and primary health care spending;
  - Disbursement of Gavi-supported vaccine co-financing and traditional vaccines procurement;
  - Disbursement of TB/Malaria/HIV/AIDS co-financing.

### Accumulation of Wage Arrears
- Definition: Wage arrears = approved personnel wages and salaries not paid for 60 days. Wages and salaries include total compensation paid to central government employees, including permanent benefits.
- Valuation: arrears valued on a cumulative basis from July 1, 2021.
- Public employees: civil, police, and military personnel either statutory civil servants or under contract of the central government.

### Data to be reported for program monitoring (overview highlights)
- Authorities will provide IMF staff with required monitoring data within prescribed time limits.
- Selected items and reporting cadence (responsible institution; frequency; availability length; submission timing where specified):
  - Foreign exchange market volumes (Commercial banks, BCC interventions, BCC auctions of FX, bureaux de change, parallel market by currency): BCC; Daily; 1 day; Each Monday.
  - Foreign exchange rates (reference values, interbank, bureaux de change, parallel market by currency): BCC; Daily; 1 day; Each Monday.
  - Monetary policy instruments and interventions (Bons BCC, swap facility, emergency lending windows, interbank market rates and volumes by bank): BCC; Weekly; 1 day; Each Monday.
  - External reserves of the BCC (SMP definition), disaggregated by category and currency: BCC; Daily; 1 day; Each Monday.
  - Government deposits at the BCC and commercial banks (by type, entity, and category): BCC; Monthly; 2 weeks; Each 15th of the month of the following month.
  - DAT deposits, guaranteed deposits, or any other type of contracted guarantees of the BCC for the benefit of central government in local commercial banks (by bank and category, providing terms, by FX and local currency): BCC; Monthly; 2 weeks; Each 15th of the month of the following month.
  - Detailed monetary situation: BCC and other institutions with deposits: BCC; Monthly; 2 weeks; Each 15th of the month of the following month.
  - Detailed BCC balance sheet: BCC; Monthly; 2 weeks; Each 15th of the month of the following month.
  - Interest rates term structure of deposit institutions and of the BCC: BCC; Monthly; 1 week (2 weeks for deposit institutions); Each 15th of the month of the following month.
  - Reserves (mandatory and voluntary) of deposit institutions: BCC; Weekly; 1 day; Each Monday.
  - Account statement provided by the BIS for two-day deposit account in USD opened in the BCC books to record IMF-related disbursements (“BRI 2D FMI USD”): BCC; Monthly; 2 weeks; Each 15th of the month of the following month.
  - Execution of plan de Tresorerie (PTR)/budget in currencies and in local currency of the BCC: BCC; Weekly (Monthly for local currency); 1 week; Weekly (Monthly for local currency).
  - Detailed balance sheet information and prudential ratios/FSIs for each deposit institution (and aggregated): BCC; Monthly; 2 weeks; Each 15th of the month of the following month.
  - Consumer Price Index INS: Weekly; One week; Weekly.
  - Exports of basic products (value and volume); imports (value and volume): BCC; Monthly; 3 weeks; Each 21st of the month of the following month.
  - Indicators of domestic production: INS; Monthly; 3 weeks; Each 21st of the month of the following month.
  - Capital and financial account operations of the balance of payment: BCC; Quarterly; 3 weeks; The 21st of the month following the quarter.
  - Amounts and identity of creditors of promissory notes guaranteed by the BCC: BCC; Monthly; 3 weeks; Monthly.
  - Principal external indicators: BCC; Daily; 1 day; Daily.
  - Evolution of the execution of the treasury plan (outcome vs. projections): DTO; Weekly; 1 day; Weekly.
  - Issuance and amortization of Treasury bills and bonds (amounts, maturities, and interest rates): Comité des titres; Weekly; 3 days; Weekly.
  - External debt service (interests and principal) detailed by creditor: DGDP; Monthly; 2 weeks; Monthly.
  - Updated amounts of external arrears: DGDP; Monthly; 3 weeks; Monthly.
  - Execution of the plan of treasury flow of the government: DTO; Monthly; 2 weeks; Monthly.
  - Revenues from customs and excise taxes, including from the mining sector, broken down by category: DGDA; Monthly; 4 weeks; Monthly.
  - Revenues from direct and indirect taxes: DGI; Monthly; 4 weeks; Monthly.
  - Revenues coming from mining sector by nature: DGI; Monthly; 8 weeks; Monthly.
  - Non fiscal revenues (excluding from provinces), including revenues from mining sector: DGRAD; Monthly; 4 weeks; Monthly.
  - Collection of receipts from natural resources: CTR; Quarterly; 4 weeks; Quarterly.
  - Situation of IBP (corporate tax) subscriptions: DGI; Annual; 4 weeks; Annual.
  - Projected spending commitment plan: DCB; Quarterly; 2 weeks; Quarterly.
  - État de suivi budgétaire (ESB): DPSB; Monthly; 2 weeks; Monthly.
  - Emergency spending: amounts approved by the Committee on emergency spending and amounts paid and regularized by the BCC: Comité des Urgences; Quarterly; 3 weeks; Quarterly.
  - Privatization proceeds: DGRAD; In case of assets sale; 3 weeks; In case of assets sale.
  - Domestic debt of the central administration by category and by creditor: stock and debt service: DGDP; Quarterly; 3 weeks; Quarterly.
  - Stock of budget arrears: DCB; Annual; 3 weeks; Annual.
  - Stock of wage arrears, including details per category: Dir Paie; Monthly; 60 days; Monthly.
  - Contracting of any new external debt issued and/or guaranteed by the BCC in favor of any central or local administration: DGDP; In case of signature of loan contract; 3 weeks; Monthly.
  - Production and exports in mining sector, broken down by mine and by mineral: CTCPM; Monthly; 2 weeks; Monthly.
  - Statistical brief for the weekly meeting with the Prime Minister: DEME/Plan; Weekly (Mardi); 3 days; Weekly.
  - Updated GDP estimates and forecasts: CESCN; Quarterly; 3 weeks; Quarterly.
  - Principales productions (Tables du Condense statistique): BCC; Monthly; 3 weeks; Monthly.
  - Estimate of the budgetary cost of the fuel prices’ policy: Ministry of economy; Quarterly; 3 weeks; Quarterly.

- Indicative target for social spending (in Billion Congolese Francs) — Text Table 1:
  - RMNCAH and primary health care: Jun-21 11.2; Sep-21 5.6; Dec-21 5.6; Mar-22 5.9.
  - GAVI co-financing and traditional vaccines 1/: Jun-21 8.3; Sep-21 8.1; Dec-21 1.0; Mar-22 9.5.
  - Disbursement of TB/Malaria/HIV/AIDS co-financing: Jun-21 9.1; Sep-21 4.6; Dec-21 4.6; Mar-22 4.7.
  - Total: Jun-21 28.7; Sep-21 18.3; Dec-21 11.2; Mar-22 20.1.
  - 1/ The World Bank is covering the financing of traditional vaccines in 2021.

### Debt sustainability analysis (DSA) — key findings
- Risk of external debt distress: Moderate.
- Overall risk of debt distress: Moderate.
- Granularity in the risk rating: Some space to absorb shocks.
- Application of judgment: No.
- According to the updated Low-Income Country Debt Sustainability Framework (LIC DSF), the DRC’s debt-carrying capacity remains weak.
  - DRC remains at a moderate risk of external and overall debt distress, with some space to absorb shocks.
  - Weak revenue mobilization is a main determinant for the DRC’s moderate risk of debt distress despite a low stock of external debt.
  - Most external debt thresholds are breached under the stress tests, highlighting vulnerability to external shocks, in particular with regard to a shock to exports.
  - Given limited buffers, prudent borrowing policies are essential by prioritizing concessional loans and strengthening debt management policies.
- DRC Composite Indicator (CI) score is 2.03, corresponding to a weak debt-carrying capacity as confirmed by April 2021 WEO assumptions and 2019 Country Policy and Institutional Assessment (CPIA).

*Source: IMF staff and IDA preparation documents in the provided PDF content.*

### 1.      Public and publicly-guaranteed (PPG) external and domestic debt covers debt

### 1.      Public and publicly-guaranteed (PPG) external and domestic debt covers debt

### Coverage and debt reporting
- PPG debt covers debt contracted and guaranteed by:
  - the central government,
  - the Central Bank of Congo (BCC),
  - provinces, and
  - part of state-owned enterprises (SOEs).
- The public debt department (Direction Générale de la Dette Publique, DGDP) under the Ministry of Finance publishes quarterly and annual reports on its website with information on domestic and external debt based on the residency criteria.
- Reports summarize debt of:
  - central government,
  - Sicomines (a joint venture between the Congolese government and Chinese investors),
  - Gécamines,
  - guaranteed external debt of SOEs managed by the government,
  - provinces (only the province of Maniema is missing, out of 26 provinces),
  - the BCC.
- Other public institutions are legally prevented from borrowing externally without approval and are unlikely to command market access without a government guarantee.
- The authorities do not receive regular reports from public institutions other than those named above and are committed to improve quality of debt reporting, especially for SOEs.

### Sicomines and other project-related debt
- Sicomines’ infrastructure loans have a government guarantee which can only be called after 2050.
- Sicomines’ debt is expected to be repaid by 2027 and is collateralized by Sicomines’ earnings.
- Sicomines also contracted a loan to finance the Busanga power plant to secure its electricity supply.

### Data gaps and private sector borrowing
- Data on the debt of the private sector is scarce.
- The private sector is believed not to be borrowing externally.

### Recent macroeconomic developments
- DRC remains highly dollarized, undiversified, and vulnerable to commodity-price shocks and supply risks.
- First peaceful presidential transition since independence took place in January 2019.
- GDP growth:
  - 2019: 4.4 percent
  - 2020: 1.7 percent (estimated)
  - 2021: growth expected to recover to 4.9 percent
- Fiscal balances:
  - overall fiscal surpluses in 2017–18,
  - deficits of 1.9 and 1.8 percent of GDP in 2019 and 2020, respectively,
  - partly financed by Central Bank advances which have been discontinued after April 2020.
- International reserves: around 2 weeks of imports at end-2020.
- External arrears amount to US$282 million.
- A 5-year schedule for the repayment of external arrears has been assumed, starting in 2022.

### Public debt stock and composition (2020)
- Total Public Debt: 10,237 (Nominal in millions of US$) — 21.0 percent of GDP — 100 percent of public debt.
- Of which: arrears: 3,885 — 8.0 percent of GDP — 38 percent of public debt.
- Total External Debt: 6,579 — 13.5 percent of GDP — 64 percent of public debt; in total external debt: 100 percent.
  - Of which: SOE: 3,101 — 6.4 percent of GDP — 30 percent of public debt — 47 percent of external debt.
  - Of which: arrears: 282 — 0.6 percent of GDP — 3 percent of public debt — 4 percent of external debt.
  - Multilateral creditors: 2,177 — 4.5 percent of GDP — 21 percent of public debt — 33 percent of external debt.
  - Bilateral creditors: 1,228 — 2.5 percent of GDP — 12 percent of public debt — 19 percent of external debt.
  - Commercial creditors: 3,174 — 6.5 percent of GDP — 31 percent of public debt — 48 percent of external debt.
- Total Domestic Debt: 3,658 — 7.5 percent of GDP — 36 percent of public debt.
  - Of which: arrears: 3,603.

### Composition of domestic debt (2020)
- Stock of Treasury bills: 55 — 0.1 percent of GDP — 1.5 percent of total domestic debt.
- Reconciled legacy arrears: 1,889 — 3.9 percent of GDP — 51.6 percent of total domestic debt.
- Arrears from provinces: 146 — 0.3 percent of GDP — 4.0 percent of total domestic debt.
- Arrears to oil companies: 262 — 0.5 percent of GDP — 7.2 percent of total domestic debt.
- VAT arrears: 1,306 — 2.7 percent of GDP — 35.7 percent of total domestic debt.
- Total domestic debt: 3,658 — 7.5 percent of GDP — 100.0 percent of total domestic debt.
- There is a significant stock of about US$3 billion of arrears to be audited; according to the authorities only 20 percent of audited arrears became validated in the past.

### Macroeconomic assumptions and forecasts (2020–39)
- Real GDP growth: expected to average about 4.9 percent over the medium term.
- Inflation: projected to stabilize at 6 percent, in line with the BCC’s target.
- Primary balance: projected to average -0.2 percent of GDP after 2027.
- Current account balance: averages -2.3 percent of GDP over the medium term.
- Financing: mix of exceptional financing, concessional and non-concessional loans, and FDI; part of public investment financing from foreign grants; additional government financing needs assumed to be covered by treasury bill issuance.
- Gross official reserves: expected to rise from 3.4 weeks of imports in 2021 to about 6 weeks of imports by 2026.
- Revenues are projected to increase from 10 percent of GDP in 2019 to 13 percent in 2024 under the ECF-supported arrangement.

### Debt carrying capacity and classification
- DRC’s debt carrying capacity is classified as weak.
- Composite indicator (CI) score: 2.03.
- Applicable thresholds (as shown):
  - PV of debt in % of exports: 140
  - PV of total public debt in percent of GDP: 35
  - Debt service in % of exports: 10
  - Debt service in % of revenue: 14

### External debt sustainability — baseline and scenarios
- Baseline: external debt remains sustainable; present value of external debt estimated at 13.2 percent of GDP, significantly lower than the benchmark.
- External debt jumped to 17.2 percent of GDP in 2020, driven among other by Fund emergency assistance; external debt increases gradually after improved access to external financing.
- 40 percent of total external debt is owed by Sicomines for mining and infrastructure projects and is assumed to be repaid with dividends over 10 and 15 years, respectively.
- Alternative scenarios and stress tests:
  - Several external debt ratios breach thresholds under the most extreme shock scenario of lower nominal exports.
  - The mining sector is exposed to commodity price swings; imports are tightly linked to exports, possibly offsetting part of the shock.
  - Nominal export growth shock (specification): set to its historical average minus one standard deviation, or to the baseline scenario’s projection minus one standard deviation, whichever is lower in 2021–22.

### Public debt sustainability — baseline and scenarios
- Baseline: public debt projected to remain moderate and gradually decline to around 17 percent over the medium term; baseline debt burden indicators do not breach respective thresholds.
- Public debt is dominated by external debt.
- Treasury bill issuance has ceased; recognition of accumulated arrears to suppliers and VAT arrears to the private sector remains high.
- Alternative scenarios and stress tests:
  - Stress tests confirm vulnerability to shocks to exports and contingent liabilities.
  - Under a sharp decline in exports, the present value of the debt ratio peaks at slightly more than 40 percent (the applicable benchmark).
  - For the debt service-to-revenue ratio, a combined contingent liabilities shock produces the most extreme effect, with debt service peaking at around 35 percent of revenue in the short term.

### Risk rating, vulnerabilities, and policy implications
- External and overall risk of debt distress: Moderate.
- External arrears at 0.6 percent of GDP are below 1 percent of GDP and qualify as a de minimis case.
- Key vulnerabilities:
  - Export performance (the “Achilles’ heel” of DRC’s debt sustainability).
  - Low revenue mobilization.
  - Contingent liabilities from guarantees and SOEs.
- Policy recommendations and priorities:
  - Build buffers by increasing international reserves.
  - Mobilize revenue, including restoring VAT normal functioning, rationalizing non-tax and parafiscal charges, streamlining tax expenditures, and modernizing and computerizing revenue administration.
  - Ensure borrowed resources enhance inclusive growth and prioritize concessional borrowing.
  - Constrain new borrowing given limited debt repayment capacity; improve public financial management.
  - Pursue structural reforms to expand debt carrying capacity, in particular domestic revenue mobilization and growth-enhancing public investment.

*Sources: Congolese authorities; IMF staff estimates and projections.*

### 18.      The authorities broadly agreed with the overall assessment of the country’s debt

### 18.      The authorities broadly agreed with the overall assessment of the country’s debt

### Authorities' position and commitments
- The authorities broadly agreed with the overall assessment of the country’s debt sustainability.
- Debt carrying capacity is expected to improve against the backdrop of the ECF-supported arrangement.
- The authorities are committed to further improve debt management, including improving the reporting of SOE and publicly guaranteed debt.

### Debt sustainability and stress-testing (summary)
- Staff and country authorities produced Debt Sustainability Analyses with alternative scenarios, historical and tailored stress tests, and public and external DSA outputs (figures and tables present projections to 2030).
- The DSA framework includes tests for commodity price, exports, natural disaster, combined contingent liabilities, market financing, and customized default settings; the most extreme stress test is defined as the test that yields the highest ratio in or before 2030.
- Notes in the DSA emphasize that all additional financing needs generated by stress-test shocks are assumed to be covered by PPG external MLT debt in the external DSA, and that default terms of marginal debt are based on baseline 10-year projections.

### Key institutional and IMF-relations facts (selected exact figures)
- Quota: 1,066.00 (SDR Million).
- Net cumulative allocation (SDR): 510.86.
- RCF Loans (outstanding line shown): 533.00; Percent of Quota 50.00.
- Recent outright RCF commitments (approval dates shown): 266.50 and 266.50 (SDR Million).
- Exchange rate (end-April 2021): US$1 = CF 1990.25.
- Resident Representative assumed duties in February 2021: Mr. Gabriel Leost.

### HIPC / MDRI and related historical debt relief (selected exact figures)
- Assistance committed by all creditors (Enhanced Framework, US$ Millions): 7,252.00.
- Of which: IMF assistance (US$ Millions): 391.60.
- IMF assistance (SDR equivalent millions): 280.30.
- Assistance disbursed to the member (SDR Millions): 280.30.
- Interim assistance (SDR Millions): 49.05.
- Completion point balance (SDR Millions): 231.25.
- Additional disbursement of interest income (SDR Millions): 50.44.
- Total disbursements (SDR Millions): 330.74.
- MDRI-eligible debt (SDR Million): 248.08.
- Debt relief by facility (SDR Million, July 2010 delivery): GRA/PRGT Total: 248.08.

### Overdue obligations and projected payments to the Fund (selected exact figures)
- Forthcoming principal (single entry shown): 79.95.
- Charges/Interest (SDR Million) by year: 0.12, 0.25, 0.25, 0.25, 0.25 (displayed as forthcoming 2021–2025).

### Institutional assessments and governance issues (summary findings)
- Safeguards Assessment (Banque Centrale du Congo, May 2020): The BCC has maintained good external audit arrangements and improved its legal framework, but operational implementation of the amended law is delayed and risks remain high for most pillars of the safeguards framework.
  - Identified weaknesses: financial reporting, internal audit practices not aligned with international standards; governance arrangements with significant gaps; weak Board oversight; legal uncertainty and conflict-of-interest risks.
  - Recommended actions: strengthen compliance with the legal framework and address vulnerabilities in control environment, especially management of foreign reserves, banking and lending operations, and monetary data reporting.
- Governance Assessment (December 9–20, 2019 mission): Four cross-cutting issues affecting economic governance in the DRC were identified: institutional complexity, normative complexity, data integrity and transparency, and checks and balances.
  - Recommendations cover fiscal governance, central bank governance and operations, financial sector oversight, rule of law, market regulation and business environment, anti-corruption, and AML/CFT.

### DSA methodological and definitional points (selected)
- Definition of external/domestic debt: Residency-based. The report states there is no material difference between the two criteria.
- Public sector debt coverage: central, state, and local governments, central bank, government-guaranteed debt, non-guaranteed SOE debt.
- The public DSA permits domestic financing to cover additional financing needs generated by stress tests; the external DSA assumes additional financing covered by PPG external MLT debt.

*Sources: IMF staff estimates and projections; country authorities (from the Democratic Republic of the Congo request for an Extended Credit Facility arrangement informational annex).*

### 1.      This supplement provides an update on the completion of a prior action and

### 1codea2021002 - 1.      This supplement provides an update on the completion of a prior action and

### Completion of prior action and governance changes at the BCC
- Staff considers the prior action on “BCC Board fully constituted in accordance with the requirements of the 2018 Central Bank Law” has been met based on information provided and the vetting process performed by the authorities.
- By presidential decrees (ordonnances présidentielles) dated June 30 and July 12, 2021, the Board of the BCC was completely renewed.
- The vacant position for the second vice-governor was filled in accordance with the 2018 BCC Law.
- All new Board members comply with the BCC Law regarding credentials and incompatibilities with other professional activities.
- A new BCC governor, Malangu Kabedi-Mbuyi (former IMF staff), has been appointed, replacing Deogratias Mutombo (served eight years), who will become head of the insurance sector regulation agency.

### COVID-19 spending disclosure and RCF commitments
- Authorities have partially met their RCF commitments on COVID-19 spending.
- Publication actions:
  - All identified COVID-19-related contracts above US$12,000 were published on the Ministry of Health’s website.
  - Thirty-five contracts above US$12,000 were identified following missions to provinces and were published.
  - These contracts amounted to US$6.9 million, bringing validated expenses to 57.8 percent of the total COVID-19-related spending.
- Outstanding commitment:
  - Authorities have not yet implemented the commitment to publish beneficial ownership information of companies awarded contracts above US$1 million (one such case so far).
  - Forthcoming IMF technical assistance will aim to ensure beneficial ownership information of contracting companies can be requested and published.

### COVID Spending – RCF Commitments Summary (as of July 6, 2021)
- in CF billion / in US$ million
  - Total: 95.8 / 51.7
  - of which GAVI: 30.1 / 16.3
  - Ministry of Health: 18.6 / 10.1
    - of which new doctors: 12.5 / 6.7
  - Provinces: 2.9 / 1.6
  - Others: 44.1 / 23.8
  - Publication: 12.8 / 6.9
    - of which between US$12,000 and US$1,000,000: 5.3 / 2.8
    - > US$1,000,000: 7.5 / 4.1
- Memo items:
  - Expenses validated (in percent of total): 57.8
  - Exchange rate (2020, average): 1851.5
- Source: Congolese authorities' data

### Recent developments, macroeconomic performance and outlook
- Pandemic and shocks:
  - Three waves of infections since March 2020; last wave reported in early June 2021.
  - Lockdowns in Kinshasa and key mining sites; national response plan with fiscal and monetary measures; vaccination program received 1.7 million doses from COVAX.
- 2020 macroeconomic outcomes:
  - Real GDP growth estimated at 1.7 percent.
  - Extractive GDP: 9.7 percent.
  - Non-extractive GDP contracted by 1.3 percent.
  - Inflation rose from 4.6 percent in 2019 to 15.7 percent year-on-year in August 2020.
  - Overall fiscal deficit reached 2.1 percent of GDP (previous estimate 0.6 percent).
  - Current account deficit decreased to 2.2 percent of GDP.
- First half of 2021 developments:
  - Inflation fell to 4.8 percent y/y in April 2021.
  - Exchange rate depreciated by 0.9 percent since January.
  - Mining activity remained strong; fiscal stance improved aided by large corporate tax payments in April.
  - Volcano eruption near Goma in May prompted emergency spending.

### SMP performance and reforms implemented
- SMP achievements:
  - Satisfactory performance under the SMP despite pandemic-related delays.
  - All but one quantitative indicative targets (ITs) for the December 2019 test date were met.
  - About half of the ITs were met for the March and May 2020 test dates.
  - Authorities fully implemented corrective measures agreed with staff prior to ECF negotiations.
- Key reforms and actions:
  - Publication of all new mining contracts since November 2019 and stepped-up publication of past contracts.
  - Issuance of a decree to strengthen public debt management and monitor all new debt contracts, including by SOEs.
  - Identification of contingent spending and urgent revenue mobilization measures to safeguard 2020 budget execution and avoid recourse to BCC advances.
  - Publication online, as of June 23, of 32 out of the 35 COVID-related procurement contracts exceeding US$12,000.
  - Commitment to submit an audit report on COVID spending to Parliament in September 2021 and publish thereafter.

### Program objectives, policy priorities and reform agenda for the medium term
- Overall objective:
  - Negotiate a medium-term reform package supported by an ECF arrangement to anchor reforms and mobilize donor support.
- Fiscal policy and revenue mobilization:
  - Target: increase the revenue-to-GDP ratio by 3.5 percentage points by 2023.
  - Four-pillar strategy:
    - (i) restoring normal functioning of VAT by ending exemptions granted to mining companies;
    - (ii) rationalizing non-tax and parafiscal charges, including streamlining excise duties;
    - (iii) streamlining tax expenditures, with a rationalization plan based on IMF recommendations to be finalized by end-2021;
    - (iv) modernizing revenue administration by reforming governance of the three tax administrations and scaling up computerization of the revenue chain.
  - Spending discipline measures:
    - Increase domestically financed investment from 0.1 percent of GDP in 2020 to over 2.5 percent of GDP in 2023.
    - Rationalize the wage bill, limit fuel-related subsidies, and gradually reform the civil servants’ pension system.
- Public financial management and transparency:
  - Consolidate government accounts in a single treasury account.
  - Improve inter-institutional coordination to reinforce budgetary credibility.
  - Strengthen financial reporting and oversight including for SOEs.
- Monetary and financial sector reforms:
  - Modernize monetary policy instruments; implement new reserve requirement framework.
  - Improve BCC’s financial position with regularization of outstanding government credit.
  - Discontinue monetary financing of the fiscal deficit and guarantees to the private sector.
  - Strengthen risk-based supervisory framework and bank oversight; new macro-prudential committee led by MOF and BCC.
  - Submit a new Commercial Banking Law to Parliament by end-November 2021; complete a Financial Sector Stability Review (FSSR) by end-2021.
  - Support financial inclusion: restructure/strengthen MFIs; develop mobile money and other fintech services.
- External stability:
  - Increase international reserves via safeguards assessment recommendations, discontinuation of monetary financing, new reserve requirement regulation, and transfer abroad of BCC’s FX deposits at local commercial banks.
  - Limit FX interventions to allow the exchange rate to act as a shock absorber.
- Structural reforms and governance:
  - Continue publication of new mining contracts.
  - Improve governance of the mining sector and enhance the business climate by removing excessive regulation, streamlining levies, implementing a fair and predictable tax system, improving commercial dispute resolution, and better enforcing property rights.
  - Reinforce anti-corruption legal and institutional framework; publicize corruption trials.
- Capacity development:
  - Deliver IMF TA and donor assistance under a new CD strategy to support implementation across fiscal and sectoral reforms.

### Authorities’ view and request
- Authorities acknowledge risks and see upside possibilities from resumption of public/private investment, improved external relationships, and increasing mining exports.
- They request Executive Directors’ support for a three-year arrangement under the Extended Credit Facility.

*Prepared by the African Department, in consultation with other departments. Approved By Annalisa Fedelino (AFR) and Geremia Palomba (SPR). July 14, 2021. Statement by Mr. Aivo Andrianarivelo and Mr. Marcellin Koffi Alle dated July 15, 2021.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1codea2021002.pdf_