## 1. COVID-19 Pandemic in the Republic of Congo ## Source details **Canonical URL:** [1. COVID-19 Pandemic in the Republic of Congo](https://www.imf.org/-/media/files/publications/cr/2021/english/1cogea2021001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2021/english/1cogea2021001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2021/english/1cogea2021001.pdf.json) --- ### Background and government response to COVID-19 - Political context: - President Sassou Nguesso reelected with 88 percent of the vote (March 2021); new Cabinet assigned in May, including Finance Minister Rigobert Roger Andely. - No signs of social unrest or political instability, but public concern over social inequity and weak governance. - Health impact and containment (as of July 22, 2021): - 216,233 vaccines administered. - 13,156 total cases; 177 deaths; 12,292 recoveries. - Vaccination strategy and costs: - Government aims to vaccinate 60 percent of the population by mid-2022—costing $88 million (0.7 percent of GDP). - Priority sequencing: first 3 percent (health care and social workers, teachers, border professionals); next 17 percent (students, retail and office personnel); then another 40 percent to reach 60 percent total. - Operational and deployment budgeting: in 2021 authorities budgeted another 1.1 percent of GDP—0.3 percent of GDP for vaccine deployment and 0.8 percent of GDP for health care equipment and supplies, and social transfers. - Vaccine procurement details: Sinopharm (China) for first 3% as grant; Sputnik for next 17% (cash payment); African Union AVAT and World Bank financing for part of the remaining 40% (loan components reported). - Pandemic-related government expenditures and support: - In 2020, 1.6 percent of GDP was spent on the national contingency plan (including in-kind donations and development partner financing). - Urgent cash transfer program covered 340,000 vulnerable households—each receiving CFAF 50,000 (two-thirds World Bank-financed, and the rest government-financed). About 230,000 households have been paid under the scheme so far. - Business support measures: deferred certain tax and duty payments; corporate tax rate cut from 30 to 28 percent; turnover tax for small businesses reduced from 7 to 5 percent for turnover below CFAF 100 million. - BEAC measures: policy rate lowered by 25 bps to 3.25 percent in March 2020, liquidity injections, temporary purchases of government securities. ### Key pandemic indicators and risks - Epidemiological trends: - New cases declined since April 2021 after vaccine deployment began in March 2021. - Delta variant poses serious risks of a new pandemic wave. - All departments affected; Brazzaville and Pointe-Noire have highest confirmed cases. - Vaccine doses administered breakdown: - 188,758 Sinopharm doses. - 22,586 Sputnik V doses. - 4,546 Sputnik Light doses. - 343 Johnson and Johnson doses. - Government Response Stringency Index: - Policies were stricter than world average in March 2020 but have gradually become less strict. ### The Club de Brazzaville (domestic arrears mechanism) - Structure and purpose: - Banking pool of BGFI Bank, LCB, Eco Bank, BSCA established in 2020 to support domestic arrears repayment—23 percent of GDP accumulated by the government over the past decade. - Club purchases domestic public debt held by the private sector in exchange for a nominal haircut of 15–30 percent except for social arrears where no haircut is applied. - Government repays the banking pool through an escrow account at 6.5 percent interest; repayments spread over 8 years with a 2-year grace period. - Outcomes and benefits: - At end-2020, CFAF 332 billion arrears (6 percent of GDP) had been repaid through the Club. - Key benefits: reduced government liquidity pressures; improved private sector liquidity facilitating repayment of overdue loans and NPL reduction; eased social tensions. ### Banking sector and financial stability - Non-performing loans (NPLs): - NPLs declined from 23 percent in 2019 to 19 percent in 2020. - Credit and capital: - Private sector credit grew 4 percent in 2020. - Capital adequacy ratio fell from 29 percent to 16 percent during 2020 due to increased risk-weighted assets and higher provisioning. - Regulatory and recapitalization actions: - Two non-systemic banks were recapitalized. - COBAC revoked the license of a small, undercapitalized bank in September 2020. ### Recent economic developments and outlook - Real GDP: - Real GDP growth fell to -8.2 percent in 2020 and is expected at -0.2 percent in 2021. - Oil sector: - Oil production growth was -8.5 percent in 2020 and is projected at -2.9 percent in 2021. - Drivers in 2020: pandemic-related restrictions obstructing oil field access and temporary technical disruptions for one oil company. - 2021: field access largely normalized but insufficient investment during pandemic prevents largest producers from fully restarting oil production. - Non-oil sector: - Non-oil growth: -8.0 percent in 2020; projected 0.9 percent in 2021. - Support factors in 2021: easing of lockdowns, gradual vaccine rollout, domestic arrears payments in 2020Q4, higher oil prices, agricultural and mining expansion, substitution of locally-sourced inputs, improved services activity, and post-election confidence. - Inflation: - Average headline inflation: 1.8 percent in 2020; anticipated 2.0 percent in 2021. - Inflation expected to rise to around 3 percent from 2022 onwards. - External sector: - Current account balance: -0.1 percent of GDP in 2020; projected 12.1 percent of GDP in 2021 driven by changes in oil exports. - Oil exports: dropped 42 percent in 2020 relative to 2019; anticipated increase of 52 percent in 2021. - Fiscal developments: - Oil revenues were halved relative to 2019. - Non-oil revenues fell less; mitigated by revenue-enhancing measures (electronic payments, broadening of tax base). - Unexpected pandemic-related spending (increased social transfers) and increased domestically-financed capital spending were more than offset by lower foreign-financed capital spending and oil-related transfers to state-owned enterprises. - Substantial domestic arrears repaid using domestic financing, with the Club de Brazzaville a main mechanism. ### Fiscal performance snapshot (selected numbers, Percent of non-oil GDP) - Total revenue and grants: 44.2 (2019), 31.1 (2020), 15.2 (2021H1 est./prel.), 15.3 (2021H1 est./prel.). - Oil revenue: 29.1 (2019), 15.3 (2020), 7.8 (2021H1 est./prel.), 8.8 (2021H1 est./prel.). - Non-oil revenue: 13.9 (2019), 13.4 (2020), 6.5 (2021H1 est./prel.), 6.6 (2021H1 est./prel.). - Expenditure and net lending: 36.4 (2019), 32.8 (2020), 16.7 (2021H1 est./prel.), 15.7 (2021H1 est./prel.). - Wages: 7.7 (2019), 8.3 (2020), 4.0 (2021H1 est./prel.), 3.8 (2021H1 est./prel.). - Transfers: 11.8 (2019), 11.2 (2020), 5.4 (2021H1 est./prel.), 4.2 (2021H1 est./prel.). - Capital expenditure: 6.1 (2019), 5.0 (2020), 2.4 (2021H1 est./prel.), 1.7 (2021H1 est./prel.). - Domestically-financed capital: 2.1 (2019), 2.8 (2020), 1.4 (2021H1 est./prel.), 1.6 (2021H1 est./prel.). - Externally-financed capital: 4.0 (2019), 2.2 (2020), 1.0 (2021H1 est./prel.), 0.1 (2021H1 est./prel.). - Non-oil primary balance: -15.9 (2019), -15.2 (2020), -8.4 (2021H1 est./prel.), -7.2 (2021H1 est./prel.). - Primary balance: 13.1 (2019), 0.2 (2020), -0.7 (2021H1 est./prel.), 1.5 (2021H1 est./prel.). - Overall balance, cash basis: 4.6 (2019), -1.0 (2020), -1.1 (2021H1 est./prel.), -0.3 (2021H1 est./prel.). ### External financing and IMF program - The Extended Credit Facility (ECF) arrangement expired on April 10, 2021. The first review under the three-year arrangement (approved July 2019) was never concluded mainly due to debt sustainability challenges. - Progress in restructuring external debt contracts and benefits from G-20 DSSI in 2020 noted; structural reforms under the arrangement and past Article IV recommendations have been advancing. ### Banking sector indicators (selected figures from annexes) - Regulatory capital to risk-weighted assets (percent): 19.5 19.1 22.8 24.9 28.8 22.3 16.1. - Non-performing loans (gross) to total loans (gross) (percent): 3.6 4.8 13.3 18.2 23.1 27.4 19.0. - Gross loan (banks' book) - bn FCFA: 1,424; 1,460; 1,401; 1,308; 1,166; 1,253; 1,357.8. ### Capital and interest composition (selected sequences) - Interest (annual sequence): 1.8 3.2 1.3 1.3 1.9 1.4 2.0 1.9 1.9 1.9 2.0. - Capital expenditure (annual sequence): 4.5 3.7 4.2 3.6 3.9 3.5 4.5 4.9 4.5 4.8 4.7. - Domestically financed capital expenditure: 2.3 1.3 2.5 2.0 2.1 1.9 2.2 2.2 2.2 2.4 2.5. ### Medium-term outlook, risks, and structural challenges - Growth projections: - Recovery expected from 2022 with 2.3 percent real GDP growth in 2022; 2.8 percent average medium-term growth on current policies. - Non-oil economy projected to average 3.5 percent growth during 2022–26. - Oil production averaging 1 percent growth during 2022–26; peak at 125 million barrels in 2024. - Long-term growth potential constrained; growth around 3.5 percent beyond 2027. - Current account and inflation: - Current account expected to gradually deteriorate as medium-term imports increase. - Inflation expected around 3 percent from 2022 onward. - Fragility and development challenges: - Recovery hinges on securing development partner financing to support deeper reforms and adjustment to global oil market transformations and adaptation to climate change. - Intensified flooding and new refugees from the Central African Republic are increasing food insecurity and poverty. - Without accelerated economic diversification and development partner financing, medium-term real per capita GDP will steadily decline and SDGs will be out of reach. ### Risks and near-term scenarios - Pandemic risk: - Spread of the COVID-19 Delta variant could set back recovery; slow vaccine rollout and uncertainties over vaccine resistance raise the chance of a third wave. - A third wave would likely entail strict lockdowns and increased health and social assistance spending (largely offset by reduced capital and non-essential goods and services spending). - Oil and external risks: - Oil revenue prospects depend on oil prices, production risks, and phasing out historical tax concessions to oil producers. - Sensitivity of debt sustainability to oil prices will decline in line with reductions in outstanding external debt. - Other risks: - Adverse weather conditions could weigh on agricultural production, raising food insecurity and inflationary pressures. - Upside scenarios: - Higher metal prices could boost mining investments; new low-cost oil and gas discoveries; accelerated reform implementation could unlock external private and official concessional financing. ### Fiscal policy and debt sustainability — findings and projections - Debt restructuring agreements and projected increase in oil revenues (2021–26) have restored debt sustainability. - Overall public debt-to-GDP is projected to decline from 101 percent of GDP to 57 percent during 2020–26, driven by rapid repayments of external debt and domestic arrears. - One-fifth of external debt will be repaid in 2021 because repayments to the largest external commercial creditor is tied to oil prices. - Extension of the G-20 DSSI through 2021, targeted medium-term improvement in the non-oil primary deficit, and contracting of concessional debt are helping to reduce liquidity pressures from rapid debt repayments. - Debt sustainability remains highly vulnerable to risks, especially negative oil price shocks. - Buffers: gradual increase of government deposits at the BEAC, availability of financing from Congolese financial markets, and access to the CEMAC regional financial markets. - Until debt restructuring processes are concluded and negotiations with two external creditors are officially concluded, debt is classified as being “in debt distress”. ### Fiscal policy — budget and fiscal stance - Staff projects a slightly wider non-oil primary deficit than in the 2021 revised budget (adopted August 9). - Revised budget prioritizes social assistance, healthcare, education, infrastructure, and domestic arrears payments. - Targeted non-oil primary deficit: 15.8 percent of non-oil GDP (0.6 percentage points larger than last year). - Staff recommended increasing budgeted goods and services and transfer spending to avoid accumulating new domestic arrears—bringing projected 2021 non-oil primary deficit to 17.0 percent of non-oil GDP. - Revenue strengthening measures in place: e-tax declaration and payment; higher excises; introduction of import duties and a single payroll tax in the petroleum sector; gradual phasing-out of CIT exemptions for violating investment conventions; increased taxes on certain non-petroleum exports. - Staff supported budgeted enhancements in health and education spending and full continuation of the Lisungi program anchored around the Single Social Register (SSR). - Plans for use of 2021 SDR allocation supported: will finance the 2022 budget; part of 2009 SDR allocation is being used to finance the 2021 budget. ### Medium-term fiscal strategy and policy recommendations - Authorities’ medium-term fiscal strategy prioritizes debt sustainability, domestic arrears repayments, and safeguarding social and domestically-financed capital spending. - A 4-5 percent of non-oil GDP (1-1½ percent of GDP) improvement in the non-oil primary balance during 2021-26 is projected based on adopted measures. - Staff advised the authorities to: - Preserve fiscal space for critical development spending by unwinding pandemic measures faster than currently planned. - Slow domestic arrears repayments if revenues fall short. - Continue policies initiated over the past 3 years: revenue mobilization, reducing non-priority current spending, transfers and subsidy reforms, transparency of SOE operations, and rationalizing the wage bill. - Specific revenue and spending measures recommended: - Excise increases in line with CEMAC guidelines; strengthened tax arrears’ collection; application of the on-going enterprise census to support tax base broadening; gradual phasing-out of CIT exemptions for violating investment conventions. - Reduce numerous VAT exemptions and eliminate the reduced VAT rate for imports related to agreed investment conventions; improve implementation of VAT on refined petroleum products. - Comprehensive review of the fiscal regime of the oil sector to further raise government’s oil-related revenues and improve governance of oil revenues. - Further reduce transfers and subsidies: improve electricity billing and coverage; implement the 2005 price-based regulatory framework for fuel prices with mitigation for vulnerable groups; enforce full payment by CORAF for oil it purchases and full payment of dividends by large SOEs such as SNPC. - Expand analysis of financial status of decentralized government units and public enterprises to better understand fiscal risks. - Finalize new strategy for clearance of domestic arrears upon conclusion of audits for 2017–18 in 2021Q4; timely implementation of 2019–20 audits; avoid new domestic arrears. - Improve public investment management: better planning and efficient implementation; a survey on efficiency of past investment projects is underway. - Work with development partners towards resuming budget financing and increasing concessional project financing. - Settle non-DSSI external bilateral and commercial arrears, except those under litigation. External official arrears were US$222 million at end-2020, of which US$84 million are expected to be rescheduled under the DSSI (pending finalization of agreements with Turkey, India, and Brazil). A plan is being developed to resolve US$101 million of pre-HIPC arrears. - Measures to prevent reoccurrence of external arrears discussed (e.g., a dedicated sub-account within the TSA at BEAC). ### Debt management and transparency - Staff stressed prudent debt management and progress in adopting a comprehensive medium-term debt management strategy with technical support from development partners. - Recommended establishing a single database—built off the existing Caisse Congolaise d'Amortissement (CCA) database—covering all central government debt, government guaranteed debt, and all debt of public enterprises, public institutions and local governments (including non-government guaranteed debt). - Improve recording, quarterly data publication, and better coordination and information sharing across relevant agencies, as recommended by IMF TA. ### Advancing governance — progress and priorities - Progress reported: new anti-corruption law and organic law for the Court of Auditors and Budgetary Discipline (CABD) expected to be adopted by Parliament in October; adoption of implementing decrees of laws establishing the Commissions on Anti-Corruption and Transparency; operationalization of both Commissions and the Transparency Law; steps to enhance CABD’s resources and capacity. - PFM reforms advanced: closing central government accounts in commercial banks; recent completion of audits of oil production costs and of CEC. - EITI progress: 2018 report published; 2019 and 2020 reports to be published in coming months. - Prioritized implementation areas: - Transition to SIGFIP targeted for FY 2022 with FAD TA in August and September. - Adopt new organizational chart for the Ministry of Finance; improve TSA architecture at BEAC including automatic transfer of sales revenue from oil exports to the TSA and continuing closure of central government accounts in commercial banks. - Develop a new medium-term strategy for PFM reforms with a comprehensive 3-year rolling action plan; develop legal and regulatory framework for PPPs consistent with international best practice. - Publish key PFM reports (oil production costs audit, CEC audit, IGF reports, CNC) by end-2021. - Apply transparency in public procurement and pandemic-related resources; undertake and post online an audit of pandemic-related spending (audit period March 15 to December 31, 2020), procurement contracts, and ex-post reports on delivery of COVID-19 related procurement. - Operationalize recent reforms and ensure legal frameworks are consistently implemented; additional financing from development partners will be critical for the Commissions on Transparency and Anti-Corruption. ### Economic diversification and adapting to climate change — strategy and measures - New growth strategy for 2022–26 centers on economic diversification and inclusion (especially job creation) and aligns with Congo’s climate resilience strategy. - Priority areas: reduce dependence on rain-fed agriculture; become a regional land and water transit hub; expand agro-processing, tourism, and the digital economy. - Key measures recommended: - Improve infrastructure for transport, irrigation, flood protection, water and sanitation, and telecommunications. - Increase use of solar, wind, or geothermal energy for rural electrification; pursue mitigation policies such as phasing-out energy subsidies and eventually introducing a carbon tax, with measures to protect poorer households. - Raise external competitiveness by removing trade barriers and improving contract enforcement, insolvency procedures, and investor protection. - Improve access to finance to reduce informality, boost investment in the non-oil sector (especially for SMEs), and help households build resilience to climate shocks. BEAC and COBAC initiatives emphasize improving regulatory framework, expanding digital financial services, and developing IT systems for payments and credit risk monitoring. - Increase financing and effectiveness of social spending; continue expansion of targeted social assistance (coverage remains low). Study distributional aspects and multiplier effects of current programs. ### Statistical issues and capacity development - Data provision judged "broadly adequate for surveillance" but with shortcomings in national accounts, monetary, fiscal, external sector statistics, debt management, and high-frequency data. - New annual GDP series applying a new methodology (Annex VII) and a rebased CPI are being published by the National Statistics Institute. - Capacity development activities include: tax policy and administration; PFM reforms; debt management; statistics in the real and external sectors; governance reforms to strengthen anti-corruption framework. - Congo is a medium-intensity user of Fund TA with a mixed implementation record. - BEAC safeguards: FY 2019 and 2020 audited financial statements in compliance with IFRS; external quality review of internal audit is underway. ### Debt to the Fund and external arrears - Congo’s outstanding debt to the Fund as of June 30, 2021 is SDR 32.64 million (20 percent of quota). - Debt service to the IMF in percent of exports will peak at 0.14 percent in 2029. - Negotiations on debt restructuring with two other external commercial creditors are on-going; an AIP reached in early 2021 with one private creditor (about one twentieth of overall public debt) but not yet approved by underlying lenders. - Authorities contest $402 million of arrears to suppliers, of which US$387 million are part of broader litigation and US$15 million are pre-HIPC arrears. ### Impact of the G20 Debt Service Suspension Initiative (DSSI) - Under the DSSI, authorities obtained relief of US$146 million of debt service due to bilateral creditors between May and December 2020 (equivalent to 1½ percent of GDP), rescheduled under NPV-neutral terms. - Under extension to end-December 2021, an additional US$175 million of debt service is eligible for rescheduling, including $132 million already rescheduled by China. - Authorities committed to devote freed resources to health, economic, and social mitigation. ### Debt dynamics, DSA findings, and stress tests (selected key numbers) - Overall public debt-to-GDP projected to decline from 101 percent of GDP to 57 percent during 2020–26. - PV of PPG external debt-to-GDP: e.g., 61.4; 45.3; 38.1; 32.3; 26.4; 22.2; 20.7; 18.0 (selected years). - Public sector debt (Percent of GDP): 77.1 (2018); 81.7 (2019); 101.0 (2020); 86.1 (2021); 77.3 (2022); 73.1 (2023); 65.6 (2024); 62.9 (2025); 62.3 (2026). - Baseline projections: PV of public debt-to-GDP ratio remains above 35 percent benchmark through much of the horizon but follows a downward path. - Stress tests: exports shock is most extreme—PV of debt-to-GDP can peak at 89 percent under severe shocks; commodity price shock leads to prolonged breaches of liquidity indicators. - DSA classification: overall and external debt assessed as sustainable but currently “in debt distress” pending finalization of restructuring with two private creditors and clearance of arrears. ### Social spending, poverty, and labor market indicators - Poverty and inequality: - Poverty headcount: 55 percent (2005); 38 percent (2011); estimated 67 percent in 2020. - Gini coefficient: 0.49 in 2011. - Income share: top 10 percent = 37.9 percent; bottom 20 percent = 4.2 percent. - Labor market: - Informal employment likely around 75 to 80 percent of non-agricultural employment. - Youth unemployment (including discouraged jobseekers) affects 32.7 percent of those aged 15 to 29. - Unemployment rates: ages 30–49 at 15.6 percent; ages 50–64 at 8.3 percent. - Social protection: - Only 0.9 percent of the Congolese population benefits from social protection compared to 22.3 percent in SSA. - Ministry of Social Affairs budget averages 0.3-0.5 percent of GDP. - Conditional cash transfers: only 20 percent goes to the poorest 20 percent of households. - Lisungi program: - Redesigned in 2015; components: unique social registry; direct conditional cash transfers (CCT); cash transfers and guidance for micro-projects (IGA); education and health services. - During the pandemic more than 230,000 households have been receiving Emergency Covid-19 Response project (ECRP) emergency cash transfers (ECTs), above the 200,000 planned. - Social spending (CFAF billion, 2019–2021): - Social Spending: 415 543 477. - Health: 144 246 191. - Education: 247 260 253. - Social Protection: 24 37 33. - Min Social Affairs: 24 37 33. - ow Lisungi: 4 19 18. - Social Spending (ECF classification): 306 380 361. - Social spending (% of GDP, 2019–2021): - Social Spending: 5.6 9.1 6.8. - Health: 1.9 4.1 2.7. - Education: 3.3 4.4 3.6. - Social Protection: 0.3 0.6 0.5. - Min Social Affairs: 0.3 0.6 0.5. - ow Lisungi: 0.0 0.3 0.3. - Social Spending (ECF classification): 4.1 6.4 5.2. ### Policy priorities and implementation challenges - Staff priorities: - Safeguard restored debt sustainability and reduce vulnerabilities. - Continue revenue mobilization and PFM reforms; reduce VAT exemptions; review fiscal regime of oil sector; reduce transfers and subsidies; improve public investment management; finalize audits and arrears clearance strategies; enhance debt transparency and reporting. - Implementation challenges: - Absorption, implementation capacity, and insufficient ownership remain major risks. - Slow implementation of previous TA recommendations; mixed track record of TA uptake. - Need to prioritize TA recommendations, improve management of local staff, and coordinate TA with authorities’ requests. - Fund engagement: - Continued coordination across IMF departments and with development partners (WB, AfDB, UN, AFD) for TA and capacity development. - Next Article IV consultation recommended on standard 12-month cycle. ### Conclusions (selected) - Improving effectiveness of social assistance, health, and education is necessary to sustainably reduce poverty and inequality. - Expand coverage and improve targeting of social assistance; enhance quality and coverage of health and education; conduct stock-taking of existing social programs and prioritize effective spending. - Exiting fragility hinges on securing development partner financing to support deeper reforms, adjustment to global oil market transformations, and adaptation to climate change. - Continued governance and PFM reforms, operationalization of anti-corruption and transparency commissions, and improved public debt management are critical to reduce fragility and support diversification. *Source: IMF staff report — "COVID-19 Pandemic in the Republic of Congo" (excerpts and tables as provided).* ### 1. COVID-19 Pandemic in the Republic of Congo ______________________________________________________ 5 ### 1. COVID-19 Pandemic in the Republic of Congo ### Background and government response to COVID-19 - Political context: - President Sassou Nguesso reelected with 88 percent of the vote (March 2021); new Cabinet assigned in May, including Finance Minister Rigobert Roger Andely. - No signs of social unrest or political instability, but public concern over social inequity and weak governance. - Health impact and containment (as of July 22, 2021): - 216,233 vaccines administered. - 13,156 total cases; 177 deaths; 12,292 recoveries. - Vaccination strategy and costs: - Government aims to vaccinate 60 percent of the population by mid-2022—costing $88 million (0.7 percent of GDP). - Priority sequencing: first 3 percent (health care and social workers, teachers, border professionals); next 17 percent (students, retail and office personnel); then another 40 percent to reach 60 percent total. - Operational and deployment budgeting: in 2021 authorities budgeted another 1.1 percent of GDP—0.3 percent of GDP for vaccine deployment and 0.8 percent of GDP for health care equipment and supplies, and social transfers. - Vaccine procurement details in deployment plan include Sinopharm (China) for first 3% as grant; Sputnik for next 17% (cash payment); African Union AVAT and World Bank financing for part of the remaining 40% (loan components reported). - Pandemic-related government expenditures and support: - In 2020, 1.6 percent of GDP was spent on the national contingency plan (including in-kind donations and development partner financing). - Pandemic-related urgent cash transfer program covered 340,000 vulnerable households—each receiving CFAF 50,000 (two-thirds World Bank-financed, and the rest government-financed). About 230,000 households have been paid under the scheme so far. - Business support measures: deferred certain tax and duty payments, cut the corporate tax rate from 30 to 28 percent, reduced turnover tax for small businesses from 7 to 5 percent for turnover below CFAF 100 million. - BEAC measures: monetary easing including lowering the policy rate by 25 bps to 3.25 percent in March 2020, injecting liquidity to banks, and implementing temporary purchases of government securities. ### Key pandemic indicators and risks - Epidemiological trends: - New cases declined since April 2021 after vaccine deployment began in March 2021. - Delta variant poses serious risks of a new pandemic wave. - All departments affected; Brazzaville and Pointe-Noire have highest confirmed cases. - Vaccine doses administered breakdown: - 188,758 Sinopharm doses. - 22,586 Sputnik V doses. - 4,546 Sputnik Light doses. - 343 Johnson and Johnson doses. - Government Response Stringency Index: - Policies were stricter than world average in March 2020 but have gradually become less strict. ### The Club de Brazzaville (domestic arrears mechanism) - Structure and purpose: - Banking pool of BGFI Bank, LCB, Eco Bank, BSCA established in 2020 to support domestic arrears repayment—23 percent of GDP accumulated by the government over the past decade. - Club purchases domestic public debt held by the private sector in exchange for a nominal haircut of 15–30 percent except for social arrears where no haircut is applied. - Government repays the banking pool through an escrow account at 6.5 percent interest; repayments spread over 8 years with a 2-year grace period. - Outcomes and benefits: - At end-2020, CFAF 332 billion arrears (6 percent of GDP) had been repaid through the Club. - Key benefits: reduced government liquidity pressures; improved private sector liquidity facilitating repayment of overdue loans and NPL reduction; eased social tensions. ### Recent economic developments and outlook - Real GDP: - Real GDP growth fell to -8.2 percent in 2020 and is expected at -0.2 percent in 2021. - Oil sector: - Oil production growth was -8.5 percent in 2020 and is projected at -2.9 percent in 2021. - Drivers in 2020: pandemic-related restrictions obstructing oil field access and temporary technical disruptions for one oil company. - 2021: field access largely normalized but insufficient investment during pandemic prevents largest producers from fully restarting oil production. - Non-oil sector: - Non-oil growth: -8.0 percent in 2020; projected 0.9 percent in 2021. - Support factors in 2021: easing of lockdowns, gradual vaccine rollout, domestic arrears payments in 2020Q4, higher oil prices, agricultural and mining expansion, substitution of locally-sourced inputs, improved services activity, and post-election confidence. - Inflation: - Average headline inflation: 1.8 percent in 2020; anticipated 2.0 percent in 2021. - Inflation expected to rise to around 3 percent from 2022 onwards. - External sector: - Current account balance: -0.1 percent of GDP in 2020; projected 12.1 percent of GDP in 2021 driven by changes in oil exports. - Oil exports: dropped 42 percent in 2020 relative to 2019; anticipated increase of 52 percent in 2021. - Fiscal developments: - Pandemic, oil price collapse, and reduced oil production impacted fiscal outcomes via oil revenue declines, changes in external financing for capital projects, and reforms in oil-related transfers. - Oil revenues were halved relative to 2019. - Non-oil revenues fell less; mitigated by revenue-enhancing measures (electronic payments, broadening of tax base). - Unexpected pandemic-related spending (increased social transfers) and increased domestically-financed capital spending were more than offset by lower foreign-financed capital spending and oil-related transfers to state-owned enterprises (e.g., refinery and Centrale Electrique du Congo). - Substantial domestic arrears repaid using domestic financing, with the Club de Brazzaville a main mechanism. - Fiscal performance snapshot (selected numbers, Percent of non-oil GDP): - Total revenue and grants: 44.2 (2019), 31.1 (2020), 15.2 (2021H1 est./prel.), 15.3 (2021H1 est./prel.). - Oil revenue: 29.1 (2019), 15.3 (2020), 7.8 (2021H1 est./prel.), 8.8 (2021H1 est./prel.). - Non-oil revenue: 13.9 (2019), 13.4 (2020), 6.5 (2021H1 est./prel.), 6.6 (2021H1 est./prel.). - Expenditure and net lending: 36.4 (2019), 32.8 (2020), 16.7 (2021H1 est./prel.), 15.7 (2021H1 est./prel.). - Wages: 7.7 (2019), 8.3 (2020), 4.0 (2021H1 est./prel.), 3.8 (2021H1 est./prel.). - Transfers: 11.8 (2019), 11.2 (2020), 5.4 (2021H1 est./prel.), 4.2 (2021H1 est./prel.). - Capital expenditure: 6.1 (2019), 5.0 (2020), 2.4 (2021H1 est./prel.), 1.7 (2021H1 est./prel.). - Domestically-financed capital: 2.1 (2019), 2.8 (2020), 1.4 (2021H1 est./prel.), 1.6 (2021H1 est./prel.). - Externally-financed capital: 4.0 (2019), 2.2 (2020), 1.0 (2021H1 est./prel.), 0.1 (2021H1 est./prel.). - Non-oil primary balance: -15.9 (2019), -15.2 (2020), -8.4 (2021H1 est./prel.), -7.2 (2021H1 est./prel.). - Primary balance: 13.1 (2019), 0.2 (2020), -0.7 (2021H1 est./prel.), 1.5 (2021H1 est./prel.). - Overall balance, cash basis: 4.6 (2019), -1.0 (2020), -1.1 (2021H1 est./prel.), -0.3 (2021H1 est./prel.). - External financing and IMF program: - The Extended Credit Facility (ECF) arrangement expired on April 10, 2021. The first review under the three-year arrangement (approved July 2019) was never concluded mainly due to debt sustainability challenges. - Progress in restructuring external debt contracts and benefits from G-20 DSSI in 2020 noted; structural reforms under the arrangement and past Article IV recommendations have been advancing. ### Banking sector and financial stability - Non-performing loans (NPLs): - NPLs declined from 23 percent in 2019 to 19 percent in 2020 (Table 6). - Drivers: arrears payments improved private sector liquidity; deposit growth supported credit growth. - Credit and capital: - Private sector credit grew 4 percent in 2020. - Capital adequacy ratio fell from 29 percent to 16 percent during 2020 due to increased risk-weighted assets and higher provisioning. - Regulatory and recapitalization actions: - Two non-systemic banks were recapitalized. - The Central African Banking Commission (COBAC) revoked the license of a small, undercapitalized bank in September 2020. ### Medium-term outlook, risks, and structural challenges - Growth projections: - Recovery expected from 2022 with 2.3 percent real GDP growth in 2022; 2.8 percent average medium-term growth on current policies. - Non-oil economy projected to average 3.5 percent growth during 2022–26. - Oil production averaging 1 percent growth during 2022–26; peak at 125 million barrels in 2024. - Long-term growth potential constrained by reduced global oil demand and financing constraints; growth around 3.5 percent beyond 2027. - Current account and inflation: - Current account expected to gradually deteriorate as medium-term imports increase. - Inflation expected around 3 percent from 2022 onward. - Fragility and development challenges: - Ensuring recovery reduces Congo’s fragility hinges on securing development partner financing to support deeper reforms and adjustment to global oil market transformations and adaptation to climate change. - Recent intensified flooding and new refugees from the Central African Republic are increasing food insecurity and poverty. - Without accelerated economic diversification and development partner financing for resilience-building and inclusiveness, medium-term real per capita GDP will steadily decline and SDGs will be out of reach. *Source: IMF staff report — "COVID-19 Pandemic in the Republic of Congo" (excerpts and tables as provided).* ### 10. Risks are tilted to the downside. ### 10. Risks are tilted to the downside. ### Risks and near-term scenarios - A possible spread of the COVID-19 Delta variant to Congo could set back the path to economic recovery. A slow vaccine rollout—which could be further delayed by hesitant populations and weaknesses in medical infrastructure—and uncertainties over vaccine resistance to the variant are raising the chances of a third pandemic wave. - A third pandemic wave would likely entail another round of strict lockdowns and increased health and social assistance spending (which would be largely offset by reduced capital and non-essential goods and services spending in line with the previous lockdown). - Oil revenue prospects depend on oil prices—where global oil market volatility is amplified by the pandemic and transition to a low-carbon global economy—production risks, and the government’s success in phasing out historical tax concessions to oil producers (¶8). - The sensitivity of debt sustainability to oil prices will decline in line with reductions in outstanding external debt (¶11). - Non-oil growth will depend on oil sector developments, domestic arrears payment, successful reform implementation, quelling of the pandemic, and continued socio-political stability—where fragilities linked to poverty and inequality could lead to unrest. - Adverse weather conditions could weigh on agricultural production raising food insecurity and inflationary pressures. - Upside scenarios: higher metal prices could boost mining investments; there may be new low-cost oil and gas field discoveries; accelerated reform implementation could boost investor and development partner confidence—potentially unlocking external private and official concessional financing. ### Fiscal policy and debt sustainability — findings and projections - Debt restructuring agreements (Annex II and DSA) and the projected increase in oil revenues (2021–26) have restored debt sustainability. - Overall public debt-to-GDP is projected to decline from 101 percent of GDP to 57 percent during 2020–26, driven by rapid repayments of external debt and domestic arrears. - One-fifth of external debt will be repaid in 2021 because repayments to the largest external commercial creditor is tied to oil prices. - The extension of the G-20 DSSI through 2021, the targeted medium-term improvement in the non-oil primary deficit, and contracting of concessional debt are helping to reduce liquidity pressures resulting from rapid debt repayments. - Debt sustainability remains highly vulnerable to a number of risks, especially negative oil price shocks. - Buffers: gradual increase of government deposits at the BEAC, availability of financing from Congolese financial markets, and access to the CEMAC regional financial markets. - Until debt restructuring processes are concluded and interrupted negotiations with two external creditors are officially concluded, debt is classified as being “in debt distress”. ### Fiscal policy — budget and fiscal stance - Staff projects a slightly wider non-oil primary deficit than in the 2021 revised budget (adopted by Parliament on August 9). - The revised budget prioritizes spending on social assistance, healthcare, education, infrastructure, and domestic arrears payments. - The targeted non-oil primary deficit of 15.8 percent of non-oil GDP is 0.6 percentage points larger than last year. - Staff recommended increasing budgeted goods and services and transfer spending to avoid accumulating new domestic arrears—bringing the projected 2021 non-oil primary deficit to 17.0 percent of non-oil GDP. - Staff and the authorities agreed on the need for firm application of tax policies and revenue administration reforms adopted over the past two years to reduce risks of revenue shortfalls. - Non-oil revenues are improving due to tax administration reforms (including e-tax declaration and payment), higher excises, introduction of import duties and a single payroll tax in the petroleum sector, a gradual phasing-out of CIT exemptions for violating investment conventions, and increased taxes on certain non-petroleum exports. - Oil revenues could be substantially improved if the authorities are successful in negotiations with oil producers on new conventions for tax concessions, including phasing out traditional tax exemptions and raising import duties and electronic transfer and turnover taxes. - Staff supported budgeted enhancements in health and education spending: health spending prioritizes direct pandemic-related needs, vaccine distribution, and broader needs; increased education spending is largely for hiring new teachers. - Staff welcomed emphasis on social assistance, including full continuation of the Lisungi program along with increased government financing for it. Social assistance is anchored around the Single Social Register (SSR). - Staff supported the authorities’ plans for use of the 2021 SDR allocation, which will support critical social spending. Part of the 2009 SDR allocation is being used to finance the 2021 budget; the 2021 SDR allocation will finance the 2022 budget. ### Medium-term fiscal strategy and policy recommendations - The authorities’ medium-term fiscal strategy prioritizes debt sustainability, domestic arrears repayments, and safeguarding social and domestically-financed capital spending. - A 4-5 percent of non-oil GDP (1-1½ percent of GDP) improvement in the non-oil primary balance during 2021-26 (based on adopted measures and their lagged effects) supports this strategy. - Part of fiscal gains will finance domestic arrears repayments under the remaining Club de Brazzaville coverage and the authorities’ new scheme (offers a menu of repayment options). - Absent resumption of budget support from development partners and given high public debt, feasible increase in development spending will fall far short of what is needed to substantially reduce poverty and exit fragility. - Staff advised the authorities to: - Preserve fiscal space for critical development spending by unwinding pandemic measures faster than currently planned. - Slow domestic arrears repayments if revenues fall short. - Continue policies initiated over the past 3 years: revenue mobilization, reducing non-priority current spending, transfers and subsidy reforms, transparency of SOE operations, and rationalizing the wage bill. - Specific revenue and spending measures recommended: - Excise increases in line with CEMAC guidelines; strengthened tax arrears’ collection through an assessment and recovery plan; application of the on-going enterprise census to support tax base broadening; gradual phasing-out of CIT exemptions for violating investment conventions. - Reduce numerous VAT exemptions and eliminate the reduced VAT rate for imports related to agreed investment conventions; improve implementation of VAT on refined petroleum products. - A comprehensive review of the fiscal regime of the oil sector to further raise government’s oil-related revenues and improve governance of oil revenues. - Further reduce transfers and subsidies: improve electricity billing and coverage; implement the 2005 price-based regulatory framework for fuel prices with mitigation for vulnerable groups; enforce full payment by CORAF for oil it purchases from the government and full payment of dividends by large SOEs such as SNPC. - Expand analysis of financial status of decentralized government units and public enterprises to better understand fiscal risks. - Finalize new strategy for clearance of domestic arrears upon conclusion of audits for 2017–18 in 2021Q4; timely implementation of 2019–20 audits; avoid new domestic arrears. - Improve public investment management: better planning and efficient implementation; a survey on efficiency of past investment projects is underway. - Work with development partners towards resuming budget financing and increasing concessional project financing. - Settle non-DSSI external bilateral and commercial arrears, except those under litigation. External official arrears were US$222 million at end-2020, of which US$84 million are expected to be rescheduled under the DSSI (pending finalization of agreements with Turkey, India, and Brazil). A plan is being developed to resolve US$101 million of pre-HIPC arrears. - Measures to prevent reoccurrence of external arrears discussed (e.g., a dedicated sub-account within the treasury single account (TSA) at BEAC). ### Debt management and transparency - Staff stressed prudent debt management and progress in adopting a comprehensive medium-term debt management strategy with technical support from development partners. - Recommended establishing a single database—built off the existing Caisse Congolaise d'Amortissement (CCA) database—covering all central government debt, government guaranteed debt, and all debt of public enterprises, public institutions and local governments (including non-government guaranteed debt). - Reliability and transparency of public debt information would be enhanced with improved recording, quarterly data publication, and better coordination and information sharing across relevant agencies, as recommended by IMF TA. ### Advancing governance — progress and priorities - Progress reported: new anti-corruption law and organic law for the Court of Auditors and Budgetary Discipline (CABD) expected to be adopted by Parliament in October; adoption of implementing decrees of laws establishing the Commissions on Anti-Corruption and Transparency; operationalization of both Commissions and the Transparency Law; steps to enhance CABD’s resources and capacity. - PFM reforms advanced: closing central government accounts in commercial banks; recent completion of audits of oil production costs and of CEC. - Congo has made significant progress under the Extractive Industries Transparency Initiative (EITI) and recently published the 2018 report, with publication of the reports for 2019 and 2020 in the coming months. - Prioritized implementation areas: - Address bottlenecks in PFM reforms: transition to SIGFIP targeted for FY 2022 with supporting FAD TA in August and September; adopt a new organizational chart for the Ministry of Finance; improve the architecture of the TSA at BEAC, including automatic transfer of sales revenue from oil exports to the TSA and continuing closure of central government accounts in commercial banks. - Develop a new medium-term strategy for PFM reforms with a comprehensive 3-year rolling action plan; develop legal and regulatory framework for PPPs consistent with international best practice. - Publish key PFM reports: recent audit of oil production costs, the audit report of CEC and the reports of the Inspection General of Finance (IGF), and the National Accounts Commission (CNC) by end-2021. - Apply transparency in public procurement, use of public funds and financial flows of pandemic-related resources and support; undertake and post online an audit of pandemic-related spending (audit period March 15 to December 31, 2020), procurement contracts, and ex-post reports on delivery of COVID-19 related procurement. - Operationalize recent reforms and ensure legal frameworks are consistently implemented; additional financing from development partners will be critical for the Commissions on Transparency and Anti-Corruption to carry out their mandates. - Address longstanding deficiencies in the asset declaration law. ### Economic diversification and adapting to climate change — strategy and measures - Economic diversification away from oil and adaptation to climate change are fundamental to achieving a green recovery with higher, more inclusive, and resilient economic growth—necessary to escape fragility. - The new growth strategy for 2022–26 is centered around economic diversification and inclusion (especially job creation) and aligned with Congo’s climate resilience strategy. - Priority areas: reduce dependence on rain-fed agriculture; become a regional land and water transit hub; expand agro-processing, tourism, and the digital economy. - Staff encouraged prioritizing necessary measures and developing specific metrics for monitoring implementation progress—financing and capacity constraints will preclude advancing all agendas simultaneously. - Key measures recommended: - Improve infrastructure for transport, irrigation, flood protection, water and sanitation, and telecommunications to support resilience and productivity in agriculture, food processing, forestry and wood products, ICT, tourism, and financial services. - Increase use of solar, wind, or geothermal energy for rural electrification; pursue mitigation policies such as phasing-out energy subsidies and eventually introducing a carbon tax, with measures to protect poorer households. - Raise external competitiveness by removing trade barriers and improving contract enforcement, insolvency procedures, and investor protection—supported by better infrastructure, access to finance, and improved governance and transparency. - Improve access to finance to reduce informality, boost investment in the non-oil sector (especially for SMEs), and help households build resilience to climate shocks. Initiatives by BEAC and COBAC emphasize improving the regulatory framework, expanding digital financial services, and developing IT systems for payments and credit risk monitoring. - Increase the financing and effectiveness of social spending. Continued expansion of targeted social assistance (coverage remains low) would help households cope with climate shocks, increase food security, and invest in more resilient housing and business infrastructure. Staff advised studying distributional aspects and multiplier effects of current programs. *Source: 1cogea2021001 - 10. Risks are tilted to the downside.* ### 19. Statistical issues. Data provision is broadly adequate for surveillance but there are ### 19. Statistical issues. Data provision is broadly adequate for surveillance but there are shortcomings in national accounts, monetary, fiscal, external sector statistics, debt management, and high-frequency data. ### Statistical capacity and recent developments - Data provision judged "broadly adequate for surveillance" but with shortcomings in national accounts, monetary, fiscal, external sector statistics, debt management, and high-frequency data. - Staff encouraged authorities to implement Fund technical assistance advice and to seek technical assistance in areas where Congo lacks capacity to provide certain data. - A new annual GDP series applying a new methodology (Annex VII) and a rebased CPI are being published by the National Statistics Institute. ### Capacity development and technical assistance - Capacity development activities (driven by authorities’ policy objectives) include: - tax policy and administration, - PFM reforms, - debt management, - statistics in the real and external sectors, - governance reforms to strengthen the anti-corruption framework and its operationalization (Annex VIII). - Congo is characterized as a medium-intensity user of Fund TA with a mixed implementation record. ### Safeguards assessment and audit status - The BEAC has implemented priority recommendations from the 2017 safeguards assessment, including: - alignment of BEAC’s secondary legal instruments with its Charter, - issuance of FY 2019 and 2020 audited financial statements in compliance with IFRS. - Work is underway to undergo an external quality review of internal audit (the last remaining recommendation). - Under IMF safeguards policy and the four-year cycle for safeguards assessments of regional central banks, an updated safeguards assessment of the BEAC is expected to be conducted in due course. ### Debt to the Fund and debt service projections - Congo’s outstanding debt to the Fund as of June 30, 2021 is SDR 32.64 million (20 percent of quota). - Debt service to the IMF in percent of exports will peak at 0.14 percent in 2029. ### Regional foreign-exchange measures - Congo is assisting in implementing regional foreign exchange regulations, including ensuring that all public entities (including the national oil company) repatriate and surrender their foreign exchange receipts. ### Staff appraisal: macro-fiscal and structural assessment - Key aggravating factors: - The pandemic, transformation of global oil markets, and climate change are aggravating fragilities in Congo. - Oil dependence made the economy highly vulnerable to the drop in global oil prices. - Investment in oil production is less than pre-pandemic expectations partly due to the global transition to low-carbon economies. - Poverty, food insecurity, and unemployment are on the rise despite improvements in economic activity this year supported by higher oil prices, relaxation of pandemic-related restrictions, vaccine rollout, social spending, and domestic arrears repayments. - Medium-term growth constrained by high sensitivities to climate change (heavy reliance on rain-fed agriculture) and weak governance and structural challenges. - Policy priority and financing: - Exiting fragility hinges on securing development partner financing to support deeper reforms, adjustment to global oil market transformations, and adaptation to climate change. - Authorities’ new economic strategy centers on inclusion (job creation and poverty reduction) and economic diversification away from oil while aligning with Congo’s climate resilience strategy. - Critical social and infrastructure spending is being gradually stepped up—benefitting from revenue mobilization efforts—but constrained by limited domestic financing and debt sustainability considerations. - Accelerated governance and structural reforms to support economic diversification and adaptation to climate change are key to reducing fragility. - Governance and PFM measures: - Staff welcomes commitment to strengthening governance and broader structural reforms. - Operationalization of the Commissions on Anti-Corruption and Transparency is commendable and should be complemented by sufficient financing (including from development partners). - Authorities are encouraged to quickly submit to Parliament the CABD law and the new anti-corruption Law. - PFM reforms recommended: a clear medium-term strategy, reorganization of the Ministry of Finance, and installation of a new information management software to promote transparent and efficient use of resources—including improved governance of oil revenues. ### Fiscal and debt management recommendations - Priority to safeguard recently restored debt sustainability and reduce vulnerabilities. - Recommended fiscal and public management actions include: - reducing VAT exemptions, - further reviewing the fiscal regime of the oil sector, - reducing transfers and subsidies (especially to oil-related SOEs), - improving management of public investment and debt—including repayment of arrears and measures to avoid accumulation of new arrears. - Together, these measures could create fiscal space for enhanced social and infrastructure spending. ### Short-term fiscal stance endorsed by staff - Staff supports a widening of the 2021 non-oil primary deficit followed by its medium-term improvement. - Budget priorities endorsed: social spending, infrastructure, and domestic arrears payments to promote recovery from the pandemic. - Staff strongly recommends increasing related goods and services spending to avoid accumulation of new domestic arrears. - Envisaged medium-term consolidation is viewed as appropriately balancing development spending needs and prudent debt management. ### Consultations schedule - It is recommended that the next Article IV consultation takes place on the standard 12-month cycle. ### Selected key quantitative indicators and fiscal figures (as presented) - Congo’s outstanding debt to the Fund as of June 30, 2021: SDR 32.64 million (20 percent of quota). - Debt service to the IMF in percent of exports: peak at 0.14 percent in 2029. - Table highlights (selected entries as presented in source tables): - GDP at current prices (CFA francs, nominal): sequences shown in table (e.g., 7,494; 7,775; 5,937; 6,976; ... 8,150). - Nominal GDP in US$ (millions): entries include 12,791; 13,281; 10,329; 12,744; 13,303; 13,814; 14,884; 15,416; 15,826. - Congolese oil price (U.S. dollars per barrel): sample entries include 62; 58; 39; 65; 65; 41; 58; 57; 55. - Oil production (Millions of barrels): sample entries include 123; 140; 112; 109; 110; 112; 125; 122; 113. - Total revenue and grants (CFAF billion, selected 2021 entries): Total Revenue and Grants 2,003; Revenue 1,946; Oil revenue 1,317; Non-oil revenue 629. - Total expenditure and net lending (CFAF billion, 2021): 1,650. - Stock of domestic arrears (CFAF billion, selected): 1,035; 488; 1,358; ... 1,107; 863; 619; 409; 204; 61. - Primary balance (percent of GDP, selected): 7.9; 8.6; 0.1; 2.9; 5.3; 4.1; 4.9; 3.3; 2.7. - Total public debt (percent of GDP, selected): 81.7; 80.4; 101.0; 84.2; 74.3; 69.0; 61.3; 58.1; 57.3. *Source: IMF staff report material excerpt (Republic of Congo).* ### Annex budgets and special Accounts ### Annex budgets and special Accounts ### Interest and Debt-Service Composition - Interest (annual sequence as listed): 1.8 3.2 1.3 1.3 1.9 1.4 2.0 1.9 1.9 1.9 2.0 - Interest — Domestic: 0.3 0.3 0.2 0.6 ... 0.5 0.8 0.9 1.2 1.4 1.6 - Interest — External: 1.5 2.9 1.1 0.8 ... 1.0 1.2 0.9 0.7 0.5 0.4 - of which: COVID-19 Moratorium Loan (interest): 2.5 0.0 ... 0.0 ... 0.0 0.0 0.0 0.0 0.0 0.0 - of which: on oil-prepurchased debt: 0.8 1.3 0.4 0.0 ... 0.3 0.6 0.4 0.3 0.1 0.0 - Amortization (paid) — external: -10.1 -3.7 -7.7 -6.8 -5.0 -6.8 -7.2 -6.2 -5.3 -4.6 -2.0 - of which: COVID-19 Moratorium Loan (principal and interest): -9.1 0.0 ... 0.0 ... 0.0 0.0 0.3 0.6 0.6 0.3 0.3 - of which: on oil-prepurchased debt: -4.6 -0.7 -4.0 -0.3 ... -1.6 -3.8 -3.4 -2.9 -2.5 0.0 ### Capital Expenditure and Financing - Capital expenditure (annual sequence): 4.5 3.7 4.2 3.6 3.9 3.5 4.5 4.9 4.5 4.8 4.7 - Domestically financed capital expenditure: 2.3 1.3 2.5 2.0 2.1 1.9 2.2 2.2 2.2 2.4 2.5 - Externally financed capital expenditure: 2.2 2.4 1.7 1.6 1.8 1.6 2.3 2.7 2.3 2.5 2.2 - Table 3 (quarterly flows excerpt — selected capital lines): - Capital expenditure (quarterly): 435 866 472 143 141 78 95 244 711 021 262 432 3 - Domestically financed (quarterly): 273 033 29 119 274 143 191 31 394 751 171 55 - Externally financed (quarterly): 162 734 18 95 403 4 76 113 315 675 61 68 ### Balances: Primary, Overall, and Non-oil Metrics - Non-oil primary balance (annual sequence): -9.9 -9.6 -7.4 -10.9 -9.9 -10.6 -9.6 -9.8 -8.8 -9.2 -8.4 - Primary balance (annual sequence): 9.3 7.9 8.6 0.1 3.7 2.9 5.3 4.1 4.9 3.3 2.7 - Non-oil primary balance (quarterly excerpt): -156 -202 -97 -189 -644 -160 -156 -212 -213 -741 -120 -198 -262 -107 -688 - Basic primary balance (quarterly excerpt): 62 -86 29 -32 -87 88 51 47 30 21 63 81 10 91 61 15 14 - Basic non-oil primary balance (quarterly excerpt): -144 -211 -121 -174 -649 -156 -156 -180 -150 -643 -99 -146 -191 -121 -557 - Basic non-oil primary balance ― excluding oil-related transfers (quarterly excerpt): -127 -200 -92 -147 -566 -133 -135 -158 -131 -557 -80 -127 -172 -102 -480 - Primary balance (quarterly excerpt): 50 -78 52 -18 7 -12 78 52 04 14 22 83 8 17 53 82 - Overall balance, payment order basis: - Excluding grants (annual sequence): 7.1 3.9 6.9 -2.9 1.7 1.3 2.8 1.6 2.5 0.8 0.0 - Including grants (annual sequence): 7.5 4.7 7.3 -1.2 1.9 1.5 3.3 2.2 3.0 1.5 0.8 - Adjustment to cash basis (annual sequence): 0.0 -1.9 0.0 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 - Overall balance, cash basis (annual sequence): 7.5 2.8 7.3 -0.7 1.9 1.5 3.3 2.2 3.0 1.5 0.8 ### Financing Flows and Balances (annual and quarterly excerpts) - Financing totals (annual sequence): -13.1 -2.8 -13.1 0.7 -1.9 -1.5 -3.3 -2.2 -3.0 -1.5 -0.8 - Foreign (net) financing (annual sequence): -8.2 -1.7 -6.3 0.8 -3.5 -3.6 -5.3 -4.1 -3.6 -2.8 -0.5 - Foreign drawings (annual sequence): 1.9 3.7 1.5 1.3 1.6 1.8 1.8 2.1 1.7 1.8 1.5 - COVID-19 Moratorium Loan (drawings): 1.0 0.0 ... 1.4 ... 1.4 0.0 0.0 0.0 0.0 0.0 - Other foreign financing (annual): 0.0 -1.7 0.0 1.4 ... 0.0 0.0 0.0 0.0 0.0 0.0 - Domestic (net) financing (annual sequence): -4.8 -1.1 -6.8 -0.1 1.6 2.1 2.0 1.9 0.6 1.4 -0.2 - Banking system (net) (annual sequence): -2.2 -1.2 -3.8 5.4 6.1 4.1 4.1 4.2 3.5 1.1 2.1 - Central bank (annual sequence): -2.3 -1.6 -3.6 1.9 0.5 -2.1 1.4 -1.6 -1.1 -1.3 -2.3 - Commercial banks (annual sequence): 0.1 0.5 -0.3 3.5 5.6 6.2 2.8 5.1 2.1 3.4 3.6 - Nonbank financing (annual sequence): -2.6 0.1 -3.0 -5.4 -4.5 -2.0 -2.1 -1.6 -0.5 -0.7 -1.5 - Of which: net purchase of government securities (quarterly excerpt): ... 0.0 ... 0.0 ... -0.4 -0.6 -0.1 1.3 1.0 -0.3 - Of which: Repayment of domestic arrears (annual sequence): -2.7 -2.4 -3.1 -3.4 -1.8 -2.4 -2.2 -2.2 -1.8 -1.7 -1.3 - Of which: Debt service to ENI (annual): 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 - Of which: Tax arrears recovery (quarterly excerpt): ... 0.0 ... 0.0 ... 0.7 0.7 0.7 0.0 0.0 0.0 ### Quarterly Central Government Operations — Revenue and Expenditure (selected lines, Billions of CFA francs) - Total revenue and grants (quarterly sequence across periods): 374 272 355 319 1,320 287 383 422 490 1,581 476 405 484 462 1,827 - Revenue (quarterly): 371 237 298 315 1,221 287 383 420 477 1,566 466 401 480 442 1,790 - Oil revenue (quarterly): 205 125 150 171 651 148 235 265 298 945 262 227 300 282 1,071 - of which: repayment of oil-prepurchased debt (quarterly): 2 1 2 1 21 8 2 1 2 1 2 1 2 1 85 19 19 19 19 77 - Non-oil revenue (quarterly): 165 112 148 144 570 139 148 156 179 621 204 175 180 160 719 - Grants (quarterly): 43 65 73 100 0 0 1 13 15 10 3 4 20 37 - Expenditure and net lending (quarterly): 343 365 325 361 1,393 351 334 380 412 1,477 409 395 462 325 1,590 - Current expenditure (quarterly): 300 307 259 313 1,179 320 293 302 317 1,232 338 292 336 301 1,267 - Wages (quarterly): 84 85 87 96 352 82 85 99 104 370 94 102 101 83 379 - Other primary current expenditure (quarterly): 198 207 149 193 748 186 178 193 206 763 169 172 219 181 742 - Goods and services (quarterly): 60 43 22 31 157 52 67 31 74 152 53 57 48 26 185 - Transfers (quarterly): 123 108 107 136 473 99 83 14 6 154 483 103 98 150 115 466 - Transfers paid with crude oil barrels (quarterly): 17 10 28 27 82 24 42 21 21 208 5 19 19 19 19 197 7 - Interest (quarterly excerpt): 181 152 224 80 52 30 11 79 9 75 18 16 37 146 - Domestic interest (quarterly excerpt): 28 71 8 35 121 54 133 137 77 326 0 - External interest (quarterly excerpt): 167 156 45 40 147 66 7 62 119 58 7 - Change in arrears (quarterly): 142 112 29 11 00 0 0 0 0 0 0 - Overall balance, cash basis (quarterly excerpt): 46 -9 141 -40 -44 -64504278 105 671022138 236 ### Memorandum and Stock Items - Stock of domestic arrears (annual sequence): 12.4 13.8 6.3 22.9 ... 15.9 12.0 8.4 5.2 2.6 0.7 - Stock of government deposits (annual sequence): 3.3 2.8 5.5 1.6 ... 3.5 1.2 2.0 2.3 2.8 4.4 - Stock of government deposits (China strategic partnership) (annual-ish sequence): ... 4.5 ... 3.9 ... 3.3 3.2 3.2 3.0 2.9 2.8 - CEMAC Reference fiscal balance (annual sequence): -3.4 2.6 2.6 ... 0.4 -0.8 -2.0 -0.3 -0.5 -0.3 - GDP at current market prices (levels): 6,528.9 7,494 7,775.2 5,937 6,976 6,976 7,168 7,336 7,806 7,999 8,150 - Non-oil GDP at market prices (levels): 2,602.8 4,533 4,790.3 4,245 4,369 4,369 4,630 4,931 5,267 5,620 5,997 *Sources: Congolese authorities; and IMF staff estimates and projections.* ### Annex budgets and special Accounts ### Annex budgets and special Accounts ### Fiscal balances and financing (Budgets and Special Accounts) - Interest: 18335580528293997593109146 - Domestic: 21017351228323313202860 - External: 162338454054616762738187 - Capital expenditure: 43100167214317215024471173300323 - Domestically financed: 27579011927681121313986138155 - Externally financed: 1643779544381133187162168 - Non-oil primary balance: -156-358-455-644-160-316-528-741-120-319-581-688 - Basic primary balance: 62-2452-870155302163243352514 - Basic non-oil primary balance: -144-354-475-649-156-312-492-643-99-245-436-557 - ― excluding oil-related transfers: -127-327-420-566-133-268-426-557-80-207-378-480 - Primary balance: 50-28257-1267119204142170208382 - Overall balance, payment order basis: 000000000000 - Excluding grants: 28-100-127-172-64-162590566381199 - Including grants: 32-61-31-73-64-1626105677798236 - Change in arrears: 1416272912220000 - External: 1416272912220000 - Domestic: 000000000000 - Overall balance, cash basis: 46-45-4-44-64-1428107677798236 - Financing: -138-93-322-280-44-1-371-105-196-371-586-236 - Foreign (net): -93-100-30219-11-19-213-251-182-324-537-382 - Drawings: 12286176781211692441951101131 - Project loans: 1228617644521261951101131 - COVID-19 Moratorium Loan: 0084000960000 - Budgetary loans: 000000000000 - Non-resident public securities: 75117117 - Collateralized loans: 000000000000 - Amortization NET (PAID) on principal, external: -146-168-404-432-90-140-382-473-202-375-638-513 - Arrears cancellation: 000000000000 - Rescheduling: 210000 - Other foreign financing: 4141418200000000 - Domestic (net): -457-20-298-3318-158146-13-47-49146 - Banking: 61105743184053-87288253066299 - Central Bank (net): 647758113044-76-145-10-25-3299 - of which: Change in government deposits (- = an increase): 60567400-30-1789182736 - Commercial banks (net): -32816206409-11432355598200 - Nonbank financing: -106-98-94-617-72-35-70-142-38-77-115-153 - Of which: Repayment of domestic arrears: -25-38-45-203-17-28-61-165-40-80-120-160 - Financing gap (- = surplus): 9213832601081534301292944870 - Exceptional financing from debt restructuring: 9213832601081534301292944870 *Sources: Congolese authorities; and IMF staff estimates and projections.* ### Balance of payments (Medium-Term, 2019–26; Billions of CFA francs) - Current account (series): 31393-884646311932-135-351 - of which non-oil: -1,222-877-1,276-900-1,195-1,297-1,387-1,480-1,548 - Trade balance (series): 2,7202,8201,4982,6432,4542,1702,2341,9921,723 - Exports, f.o.b. (series): 4,9055,2033,1314,5154,4734,2934,5024,2693,984 - Oil sector (series): 4,1634,4022,3993,6443,5893,4043,5953,3383,025 - Non-oil sector (series): 743801732872884889908931959 - Imports, f.o.b. (series): -2,186-2,383-1,633-1,872-2,020-2,123-2,269-2,276-2,261 - Oil sector: -985-1,022-627-918-957-980-1,071-991-913 - Government: -240-260-269-196-259-286-283-309-306 - Non-oil private sector: -961-1,101-737-759-804-857-915-976-1,042 - Balance of services (series): -1,651-1,511-996-1,103-1,207-1,285-1,377-1,393-1,394 - Oil sector: -1,331-1,247-331-479-508-532-586-542-502 - Non-oil sector: -320-264-665-624-698-753-791-850-892 - Income (series): -841-658-580-684-793-779-837-756-704 - Labor income: -30-309223235 - Investment income: -811-628-589-686-795-782-839-759-708 - Current transfers (net): -197-25870-10913122024 - Capital account (series): 222222221515445458 - Official grants: 282828281515445458 - Financial account (series): 347-630-219-915-4263127202487 - Direct investment (net): 266273157295332380366347334 - Portfolio investment: -1-1-1-1-1-1-1-1-1 - Other investment: 82-902-375-1,210-757-348-338-144154 - Medium and long term: -216-506-365-211-399-280-241-185-17 - Public sector: -5-486-327-346-382-301-282-226-43 - Drawings: 27511476126131155135142120 - Project: 12311476126131155135142120 - Program: 15200000000 - Other (collateralized): 000000000 - Amortization: -277-601-345-403-513-456-417-368-163 - Net change in arrears: -20-57-700000 - Private sector: -211-19-3914-1721414126 - Oil: -224-33-45262526282624 - Non-oil: 13147-12-43-513152 - Short term: 298-397-10-999-358-68-9741171 - Overall balance of payments: 400-214-204-4852165102120194 - Financing: -400-235204-73-52-165-102-120-194 - Reserve financing (- = increase): -276-23539-168-52-165-102-120-194 - Government deposits abroad: -124082000000 - Exceptional financing: 00849600000 *Sources: Bank of Central African States (BEAC) and IMF staff estimates and projections.* ### Monetary survey (2019–26; Billions of CFA francs unless specified) - Net foreign assets (series): 5316316056205695594785135876266998451,0531,1841,390 - Central bank: 4785375055735134403484244804885407058079301,127 - Deposit money banks: 5394100475611913190106138159140246254263 - Net domestic assets (series): 1,2981,3621,2621,3021,3861,6061,6851,5971,6962,2392,6533,0543,2953,6643,995 - Net domestic credit (series): 1,6331,5321,6641,6731,6661,9992,0921,5971,6962,2392,6533,0543,2953,6643,995 - Net credit to the public sector (series): 5513856236456148759589548901,1571,4561,7101,7951,9642,069 - Net credit to the Government: 5483846096356088739379338691,1541,4531,7081,7921,9622,067 - Central bank: 387274451446432506530471427355454336253148-42 - Claims: 600704601599598598605605605597540483426366306 - Use of IMF Credit: 2813127272626262626252525252320 - Deposits: 213-429-153-157-171-98-83-120-150-243-88-150-176-223-355 - Deposit money banks: 1611001581891773674071961537999991,3721,5391,8142,109 - Claims on public agencies, net: 41141053212121333333 - Credit to the economy: 1,0821,1471,0411,0281,0521,1241,1346428061,0821,1971,3441,5001,7001,926 - Credit to the Private Sector: 9971,0699629339751,0321,0595417251,0411,1541,2981,4501,6161,791 - Other items, net: -335-170-402-371-279-394-407---------------- - Broad money (series): 1,8301,9931,8641,9181,9512,1592,1562,1102,2832,8653,3523,8994,3484,8485,385 - Currency outside banks: 5115235125065255695425645877558831,0271,1451,2771,419 - Demand deposits: 9751,1441,0051,0551,0471,0691,0981,0581,0491,3821,6601,9312,1542,4012,667 - Time deposits: 3433263483563795215164546137288099411,0491,1691,299 - Growth and ratios (selected): - Broad money growth (series): 7.91.51.94.86.618.0-0.1-2.35.832.717.016.311.511.511.1 - Net foreign assets growth: 16.56.64.04.82.11.5-3.7-2.11.33.12.54.45.33.04.2 - Net domestic assets growth: -8.6-5.1-2.00.24.816.83.7-0.44.229.314.512.06.28.56.8 - Reserve money (series): 16.8-4.724.524.716.116.54.9-8.7-7.044.213.512.86.114.220.0 - Credit to the economy growth (series): -4.72.2-5.2-4.63.03.98.9-37.5-23.4-3.710.712.211.613.428.4 - Credit to the Private Sector growth (series): -6.22.1-6.3-7.42.33.510.0-41.7-25.40.810.912.511.811.410.8 - Velocity (Non-oil GDP/average M2): 2.61.4.........2.1.........1.51.41.31.21.21.1 - Total nominal GDP growth: ...3.4.........-20.8.........17.52.82.36.42.51.9 - Non-oil GDP growth: ...4.3.........-6.3.........2.96.06.56.86.76.7 - Credit to the economy/Non-oil GDP: ...23.9.........26.5.........24.825.927.328.530.332.1 - Memorandum items: - Gross imputed official reserves (CFA billion): 6177546437066556435085846418128641029113012511445 - In months of imports: 2.72.2.........2.4.........2.92.93.23.53.94.4 - Central bank liabilities to non-residents (series): 138.5217.5137.5132.4142.3203.1160.4160.4160.4323.4323.4323.4323.4320.9318.4 *Sources: BEAC; and IMF staff estimates and projections.* ### Financial soundness indicators (Banking sector, selected years) - Regulatory capital to risk-weighted assets (percent): 19.519.122.824.928.822.316.1 - Non-performing loans less provisions to capital: 4.67.933.039.449.4...... - Non-performing loans (gross) to total loans (gross) (percent): 3.64.813.318.223.127.419.0 - Return on equity (percent): 20.428.09.916.75.3...1.0 - Return on assets (percent): 2.34.01.73.00.9...0.1 - Ratio of liquid assets to short-term liabilities: 116.1104.4 146.6176.0150.8184.8174.0 - Total deposits to total (noninterbank) loans: 125.5102.8 90.589.1101.5112.5136.0 - Gross loan (banks' book) - bn FCFA (series): 1,424 1,460 1,401 1,308 1,166 1,253 1,357.8 - Gross loan - annualized growth rate (percent): 19.82.5-4.1-6.6-10.81.116.4 *Source: FSI database.* ### Public debt stock (2019–20; CFAF billion / USD million / percent of GDP) - Total public debt: 61221037281.7599911129101.0 - External debt: 4265722656.93750695763.2 - Of which: arrears: 73612489.8784145513.2 - Multilateral and other creditors: 4257205.74568467.7 - IMF: 27.7470.425.6480.4 - IDA/IBRD: 1422401.91653062.8 - AfDB: 2103562.82204093.7 - IFAD: 14230.214260.2 - Others: 32540.431580.5 - Official bilateral: 1892320625.31582293626.7 - Paris Club: 2444143.32394434.0 - Brazil: 31520.425470.4 - Belgium: 921561.2861601.5 - France: 961631.31051951.8 - Russia: 18310.217310.3 - Switzerland: 7120.15100.1 - Non-Paris Club: 1648279222.01344249322.6 - China: 1402237518.71118207518.8 - India: 611030.8551030.9 - Kuwait: 32550.430550.5 - Turkey: 48810.643810.7 - Pre-HIPC arrears (not restructured): 106 1791.4 97 1801.6 - Private Creditors: 1948330026.01711317528.8 - Chinese companies: 3115274.22374404.0 - London Club (eurobond): 1742952.31442682.4 - Oil-prepurchased debt: 1116189014.91029190817.3 - Afreximbank: 1161971.6731351.2 - Suppliers: 2303903.12284233.8 - Domestic debt: 1857314624.82249417337.9 - BEAC advances: 5729707.657210619.6 - Domestic bond: 2504233.33195915.4 - Arrears reported by CCA: 1035175413.81358252022.9 - Commercial: 65011028.7955177316.1 - Social and pensions: 3856525.14037486.8 *Sources: Congolese authorities and IMF staff estimates.* ### External arrears (2016–20; Year-end, billions of CFAF and USD million) - End-2016 stock: Total 436.0 - New arrears in 2017: 17.0; End-2017 stock: 453.0 - New arrears in 2018: 793.1; New arrears in 2019: 1246-51073612489.8 (series reflects restructuring and repayments) - End-2019 stock and End-2020 stock entries show complex movements including: - Multilateral and other creditors: 4.8-0.64.22.66.82.08.815.00.1-8.80.00.00.00.00.00.0 - Bilateral movements including Paris Club and Non-Paris Club across years with entries such as 109.023.2132.213.4145.736.8182.4309.12.4-62.6119.8222.22.065.3121.11.1 - Private creditors: 322.1-5.6316.5777.11093.6-548.45459247.31196651233.111.26651233.111.2 - Oil traders and suppliers feature prominently with large reported adjustments. *Source: Congolese authorities and IMF staff estimates.* ### Drivers of Congo’s Fragility (Annex I) - IMF definition of fragile state (FS) references: weak institutional capacity measured by World Bank CPIA average ≤ 3.2 and/or recent conflict (peace-keeping/presence in most recent three-year period). - Republic of Congo classified as FS: - Average CPIA score around 2.7 since 2017. - Key vulnerabilities: - Highly vulnerable economic structure and poor social indicators: dependence on oil; 67 percent living below the poverty line; one of the highest unemployment rates in SSA; 60 percent lacking access to electricity; limited social safety nets. - Sensitivity to climate shocks: reliance on rain-fed agriculture; intensified flooding and refugee inflows increasing food insecurity and poverty. - Weak governance: significant weaknesses in revenue and expenditure management, transparency, accountability, and persistent corruption vulnerabilities. - Political and security risks: relatively conflict-free recently; no UN peacekeeping operation; 2017 ceasefire intact; 2021 presidential elections completed peacefully; but lack of social inclusion and equity and rising regional spillover risks. *Notes: The four CPIA sub-components hover around 2.7–2.8.* ### Outcome of Strategy to Restore External Debt Sustainability (Annex II) - Strategy outcomes since 2019: - Restructuring of external debt contracts and clearance of more than $3 billion (20 percent of GDP) in external arrears. - Suspension of debt service under the G20 Debt Service Suspension Initiative (DSSI). - Key developments: - Restructuring of bilateral debt with China covering about one fifth of overall public debt; resulted in resolution of arrears and substantial upfront debt service with highly concessional debt service from 2022. - Restructuring with two out of the three largest external creditors covering one tenth of overall public debt; included resolution of arrears, nominal haircuts, maturity extensions, interest rate reductions, and linking debt service to oil prices for one oil trader. - Payment of US$64 million in arrears to multilateral and official bilateral creditors in January 2020. - Rescheduling of US$198 million in arrears with bilateral creditors under the 2020 DSSI and of US$179 million under the 2021 DSSI (including Brazil and Turkey with ongoing negotiations). Arrears to India in 2021H1 expected to be cleared as DSSI negotiations conclude. *Italic sources: Congolese authorities; BEAC; IMF staff estimates and projections; FSI database; Staff Report for the 2019 Article IV Consultation (Country Report No. 20/26).* ### 2. Negotiations on debt restructuring with two other external commercial creditors are ### 1cogea2021001 - 2. Negotiations on debt restructuring with two other external commercial creditors are ### Debt restructuring and external arrears: status and key figures - Negotiations on debt restructuring with two other external commercial creditors are on-going. - An agreement in principle (AIP) was reached in early 2021 with one private creditor, holding about one twentieth of overall public debt. The AIP has not yet been approved by the creditor’s underlying lenders. - Until the situation is resolved, the Republic of Congo is accruing arrears for debt service to the private creditor. - Discussions on the restructuring of the debt owed to the other private creditor, which is around 1 percent of overall public debt, are at a standstill. - The level of interest in continuing these discussions may be influenced by the fact that under 30 percent of the original loan amount (just under $100 million) will be outstanding by end-2021. - No arrears have been accumulated on this debt. - The authorities are discussing payment plans with Switzerland and Belgium on official debt service that came due just after the DSSI cut-off date. - Stock reconciliation with Switzerland shows $10 million at end-2020 in official arrears; the authorities plan to repay these arrears in 2021. - Arrears related to commercial debts to Belgian banks on which an official guarantee was called after the DSSI cut-off date amount to $19 million at end-2020; a payment plan is being actively discussed. - The remaining external arrears are owed to suppliers. - The authorities contest $402 million of arrears to suppliers, of which US$387 million are part of a broader litigation case and US$15 million are pre-HIPC arrears for which the authorities had requested HIPC treatment. *Authorities’ actions and implementation status related to debt and fiscal consolidation* - Progress reported: - Conclusion of debt restructuring agreements with China in 2019 and two commercial creditors in 2020-2021. - Advanced discussions with two other commercial creditors (as noted above). - Measures to improve resources through tax administration reforms (introduction of the e-tax declaration and payment), higher excises, the introduction of import duties, and increased taxes on certain non-petroleum exports. - Gradual phasing out of CIT exemptions for companies violating investment conventions. - Continued reduction of key non-priority current spending (oil transfers) and increased social transfers (up +1.3 percent in 2020). - Implementation of key PFM reforms including audit of oil production costs, closing of central government accounts in commercial banks, and transition to a more sophisticated Financial Management Information system. ### Implementation of 2020 Article IV recommendations: governance, diversification, and social priorities - Strengthening medium-term fiscal framework (Partially implemented) - Fiscal consolidation efforts and external commercial debt restructuring are underway as noted above. - PFM reforms and revenue measures detailed in prior section. - Increased social transfers recorded (up +1.3 percent in 2020). - Fostering governance and tackling corruption (Implemented) - Establishment of the Commissions on Anti-Corruption and Transparency. - Drafting a new anti-corruption law; amendments expected to be discussed in Parliament in the Fall. - Actions to improve transparency in extractive industries: 2018 EITI report released end-December 2020; authorities committed to release the 2019 and 2020 reports by end-2021. - Diversification and inclusive growth (Partially implemented) - Improvements in corporate taxation: harmonization of the special corporate tax rate, and reduction of corporate and global flat tax rates. - Domestic arrears repayment: a portion repaid in 2020. - The “Club de Brazzaville” raised financing of CFAF 332 billion from a consortium of banks that allowed the government to further pay domestic private sector arrears (net of a 15-30 percent haircut) and social arrears (no haircut). - Improved statistics: new GDP series and progress on quarterly national accounts planned to be released from December 2021 onwards. ### Risk Assessment Matrix: salient risks, likelihood, impact, and policy responses - Global risks - Uncontrolled Covid-19 local outbreaks and subpar/volatile growth in affected countries - Likelihood: High; Impact: High. - Policy response highlights: improve public health measures (including vaccine dissemination, testing capacity), follow WHO guidelines, strengthen regional pandemic response, strengthen fiscal social and health response, prioritize infrastructure projects with large fiscal multipliers and value-for-money. - Rising commodity prices amid bouts of volatility - Likelihood: Medium; Impact: High. - Policy response highlights: use higher oil prices to spare financial resources, implement structural measures to diversify the economy, enhance competitiveness, and deepen regional integration. - Intensified geopolitical tensions and security risks - Likelihood: High; Impact: Medium. - Policy response highlights: improve quality of public spending, improve investment planning and resource management, stocks/inventories management, improve distribution mechanisms. - Country-specific risks - Widespread social discontent and political instability - Likelihood: Medium/High; Impact: Medium/High. - Policy response highlights: enhance targeted social policies and social safety nets, maintain fiscal discipline, improve governance/transparency/accountability, involve CSOs and stakeholders in policy decisions. - Weak fiscal management - Likelihood: Medium; Impact: Medium. - Policy response highlights: improve coordination between government ministries, implement TA recommendations on PFM, strengthen cash management and budget execution, identify additional fiscal measures, implement SOE and governance reforms. - Higher frequency and severity of natural disasters related to climate change - Likelihood: Medium; Impact: Medium/High. - Policy response highlights: strengthen food security and rural development programs, promote investment in climate resilient infrastructure, establish appropriate social safety nets. ### Social spending: context, problems, and reform priorities - Context and key statistics - Poverty and inequality - Average poverty headcount declined from 55 percent in 2005 to 38 percent in 2011 and is estimated to have remained at that level in 2015. - Poverty headcount likely rose—estimated at 67 percent in 2020 by the latest WB SDG report—given persistent output declines and the COVID-19 pandemic. - Gini coefficient of 0.49 in 2011; income share of the top 10 percent corresponding to 37.9 percent and that of the bottom 20 percent to 4.2 percent. - Unemployment and informality - Unemployment rate in 2019 was high compared to regional and income comparators. - Informal employment likely high at around 75 to 80 percent of non-agricultural employment. - Youth unemployment (including discouraged jobseekers) affects 32.7 percent of those aged 15 to 29. - Unemployment rates: ages 30–49 at 15.6 percent; ages 50–64 at 8.3 percent. - Share of youth not in education, employment or training is 27.7 percent; females vs males: 31 percent vs 15 percent. - Among 25 to 30 years old, 22.3 percent of young men versus 37.3 percent of young women have not entered the labor force yet. - Social protection and spending adequacy - Only 0.9 percent of the Congolese population benefits from social protection compared to 22.3 percent in SSA. - Ministry of Social Affairs budget averages 0.3-0.5 percent of GDP compared to medians of 1.2 and 0.96 percent of GDP in SSA and LIDCs respectively. - Conditional cash transfers: only 20 percent goes to the poorest 20 percent of households. - Improving the effectiveness of social spending: Lisungi program and broader reforms - Lisungi program (redesigned social assistance program) - Redesigned in 2015 with support from the World Bank, AFD, WFP, and FAO. - Program components include: - a unique social registry providing single access to all social programs; - direct conditional cash transfers aiming to stimulate health and education outcomes (CCT); - cash transfers and guidance for micro-projects with income-generating activities (IGA); - education and health services. - During the pandemic the World Bank helped develop an Emergency Covid-19 Response project (ECRP) that provides emergency cash transfers (ECT) to vulnerable households (mostly urban). - To date, more than 230,000 households have been receiving ECTs, well above the 200,000 originally planned. - Authorities have been actively expanding the social registry and are considering further expanding the emergency cash transfer program. - Authorities’ engagement with the health, education, micro-project aspects of the program has dampened. - Recommendations for social spending more broadly - Conduct a stock-taking of existing social programs using a broad definition of social spending (health, education, employment, gender, poverty-reducing infrastructure). - Assess program effectiveness in reducing poverty and income inequality, which requires detailed distributional data. - Prioritize social spending, eliminate or streamline ineffective programs, and redesign programs to improve efficiency, quality, and targeting. - Make intentional distinctions between cyclical social spending (e.g., unemployment benefits or emergency COVID-19 cash transfers) and structural social spending (e.g., vocational training, social insurance, labor market programs). - Improve governance and Public Financial Management systems to channel resources more efficiently, improve targeting, and reduce wasteful spending. *Italicized source attribution: Republic of Congo — IMF country report content as provided in the supplied PDF excerpt.* ### Conclusions ### Conclusions ### Social assistance, health, and education - Improving effectiveness of social assistance, health, and education is necessary to sustainably reduce prevalent poverty and high-income inequality, particularly in rural areas. - Key actions needed: - Expand currently low coverage and poor targeting of social assistance—though targeting has recently improved—to ensure the lowest income groups benefit and are protected from shocks and any adverse consequences of structural reforms. - Enhance quality and coverage of health and education programs, including tailoring their design to the specific needs of the lowest income groups. - Conduct a stock-taking of the effectiveness of current social programs in other areas (as currently defined in the budget, such as gender, employment) in reducing poverty and income inequality; prioritize the most effective spending and streamline less effective programs. ### Authorities’ views on social spending and data needs - Authorities view allocation of social spending as critical for reducing poverty and inequality. - Constraints identified: - Not having updated household surveys, employment data and data bases on social spending and protection is a challenge for efficient allocation of resources. - Need to boost youth employability and prioritize programs based on their effectiveness in raising inclusive growth and reducing poverty. ### Government financing of social spending (Figure 6 — budget law based, in CFAF billion and % of GDP) - In CFAF billion (2019, 2020, 2021): - Social Spending:415543477 - Health144246191 - Education247260253 - Social Protection243733 - Min Social Affairs243733 - ow Lisungi41918 - Social Spending (ECF classification)306380361 - % of GDP (2019, 2020, 2021): - Social Spending:5.69.16.8 - Health1.94.12.7 - Education3.34.43.6 - Social Protection0.30.60.5 - Min Social Affairs0.30.60.5 - ow Lisungi0.00.30.3 - Social Spending (ECF classification)4.16.45.2 ### External sector assessment — overall findings - Overall assessment of the external position in 2020 was weaker than warranted by fundamentals and desirable policy settings. - Quantitative exchange rate assessments (EBA-lite and tailored approaches) produce a wide range of REER estimates spanning from an undervaluation of 30 percent to an overvaluation of 58 percent. - The permanent income hypothesis (PIH) approach is included but not used for the assessment because, for developing economies like Congo, it underestimates investment needs through the current account channel. - Given the wide range of quantitative estimates and Congo’s status as an oil producer (with little economic diversification), IMF staff give the largest weight to the qualitative external sustainability assessment. ### Current account and oil sector projections - The external current account was balanced in 2020 owing to favorable oil sector developments and import compression associated with weaker growth and fiscal adjustment. - Drivers: - In 2019 the current account balance remained marginally in surplus due to sustained oil production and the rise in oil prices since the 2016 troughs. - In 2020 import compression of consumption goods and services due to the COVID-19 pandemic helped maintain a balanced current account despite unfavorable prices. - With recent increase in oil prices the oil-sector trade balance in 2021 is projected to increase. - Oil-sector current account is projected to remain in surplus over the medium term, with oil production peaking at 125 million barrels in 2024. - Long-run outlook: - Ramp-up in production will have limited impact on the overall current account as oil fields mature. - Current account surplus peaks in 2021 driven by favorable oil prices but deteriorates afterwards due to increased imports related to investment in economic diversification and building resilience to climate change, and reduced oil production from 2025 onwards—projected to decline by an average of 14 percent per year between 2025 and 2039, absent new discoveries. - Note: Estimates are preliminary as balance of payment estimates are reported with considerable lags and subject to relatively large revisions. ### Exchange rate assessment (EBA-lite and alternative approaches) - Nominal and real exchange rate developments: - As of April 2021, NEER increased 4 percent relative to April 2020; REER depreciated by 1½ percent. NEER changes reflect euro movements; REER changes driven by lower inflation in Congo vs. trading partners. - Revised EBA-lite current account approach (using default desirable policy settings except for the cyclically-adjusted overall fiscal balance) implies: - Exchange rate undervaluation of 29.7 percent in 2020. - This estimate is higher than the 10 percent undervaluation in the 2019 Article IV, mainly because Congo maintained a balanced current account despite a fall in oil prices in 2020 and the pandemic’s impact. - Key model numbers (Summary Table: CA model / REER model): - CA-Actual -0.1 - Cyclical contributions (from model) (-)0.6 - COVID-19 adjustor (+) 1/11.8 - Additional temporary/statistical factors (+)0.0 - Natural disasters and conflicts (-)0.8 - Adjusted CA 10.2 - CA Norm (from model)2/ -2.6 - Adjusted CA Norm -2.6 - CA Gap 12.8-4.1 - o/w Relative policy gap1.6 - Elasticity -0.43 - REER Gap (in percent) -29.7 9.5 - The adjusted current account balance is 10.2 percent of GDP, which is 12.8 percentage points higher than the current account balance consistent with comparable countries; only 1.6 percent is explained by policy gaps. - Large residual highlights external sector constraints from debt challenges, debt rescheduling (DSSI) and related efforts. - Revised index REER EBA-lite approach indicates: - Norm Ln(REER) 4.592, Actual Ln(REER) 4.69 (logs), residual 0.10 → REER Gap 9.5% (overvaluation). - Policy Gap 0%; Natural Disasters and Conflicts -1.0%. - For commodity exporters like Congo, current account regression approaches are sensitive and can swing assessments without substantial economic changes. ### Consumption allocation / PIH and resource wealth approaches - Bems and de Carvalho Filho (2009) consumption allocation rules analyzed for oil exporters: - Temporary nature of non-renewable revenues calls for more savings and hence a higher current account norm, especially if production is declining. - Alternatively, anticipated increase in oil production capacity supports a larger current account deficit for consumption smoothing or credit-constrained investment dynamics. - Staff dynamic approach assumptions: - Proven oil reserves 1.6 billion of barrels plus a reasonable expectation of new discoveries. - Demographic transition reducing population growth to 1.5 percent in the long run. - Broader interpretation of return on oil wealth, including higher returns from investments in human capital and infrastructure—staff assume a 9 percent return. - Under these assumptions: - Implied current account norm hovers around 22 percent of GDP over the medium term with the constant real annuity rule (consistent with PIH), suggesting a 58 percent overvaluation. - Large current account norm arises because proven oil reserves will be exhausted in about 25 years and the country has not accumulated enough assets so far. - Current fiscal surplus is close to the fiscal savings norm and converges to the desired level by 2023 as Congo accumulates financial assets and the non-oil primary balance converges to a PIH rule. ### Qualitative external sustainability assessment - Given the wide quantitative range, qualitative assessment was applied and given highest weight. - Indicators point to weaknesses in Congo’s net foreign asset (NFA) position: - Public and publicly guaranteed external debt is sustainable but in debt distress with significant vulnerabilities going forward. - Imputed reserves are relatively low. ### Policy recommendations for external and competitiveness policy - Policy adjustment needed to improve competitiveness and create sustainable fiscal space to support investment in economic diversification: - Authorities should adjust their non-oil primary current balance. - Enhance structural competitiveness through improvements in the business environment. - Steady implementation of structural reforms—including those under the ECF—is essential to create an enabling environment for private sector development and economic diversification. - Congo’s performance on the Heritage Foundation’s Economic Freedom Index did not change since the last assessment and is slightly below averages for CEMAC, SSA and LIC countries. ### New series of GDP (Annex VII) - INS updated national accounts methodology (from SNA 1968 to SNA 1993), rebased from 1990 to 2005; volume series compiled using annual chain linking for 1990–2018; administrative data (VAT and oil production) used. - Effects of revision: - Nominal GDP up by an average of 16 percent over 2000–18. - Annual differences between old and new series in nominal terms ranged from a minimum of 4 to a maximum of 39 percent. - Average difference for 2014–18 is 27 percent. - New series shows higher fluctuations in real GDP growth rates and a lower oil sector share: oil sector now represents 42 percent of nominal GDP, compared to 59 percent in the old series. - Higher non-oil GDP share reflects better disaggregation, improved data sources (VAT database, fiscal statistics), and changes in the economy since previous base year. - INS plans further improvements and potential rebasing: - Improving collection of administrative data (VAT, GFS, BOP), producing higher-frequency data, more frequent benchmark surveys (last household budget survey was in 2011). - Government plans to implement IMF’s e-GDDS recommendations by publishing essential data through the NSDP. ### Capacity development strategy (Annex VIII) - Congo is a medium intensity user of IMF technical assistance (TA). Main capacity development areas: - Tax policy and administration. - PFM: accounting and investment management, cash management, government finance statistics, debt management. - National accounts and external sector statistics. - Anti-corruption framework (connected to AML/CFT and governance/transparency reforms). - TA intensity and recent missions: - FY20: 15 missions (10 from AFRITAC Center (AFC), and 5 from HQ, of which 1 from FAD and 4 from STA). - FY21: 24 missions (13 from AFC, and 11 from HQ (9 from FAD, and 2 from STA)). - Overall track record of implementing recommendations is mixed. - CD priorities and objectives (summarized): - Tax Policy and Revenue Administration: - Assist authorities to increase non-oil revenues; review tax exemptions; strategy to recover a large stock of tax arrears. - Challenge: mixed track record of previous TA recommendations. - PFM: - Address efficiency and transparency in preparing fiscal tables (TOFE) and producing consistent Treasury accounts (Balance des Comptes du Trésor); avoid extrabudgetary spending; enforce spending controls; produce final Treasury accounts shortly after fiscal year end. - Develop strategy/timetable to reduce oil, water and electricity subsidies while protecting the most vulnerable. - Challenge: coordination issues among public administration for timely production and dissemination of fiscal data. - Strengthen Statistics Compilation and Dissemination: - Improve data coverage, timeliness, methodology of national accounts, prices, high-frequency data; produce timely annual BoP, start producing quarterly BoP and IIP data. - Challenge: need to improve skills of Statistics Office staff and facilities. - Debt Management: - Strengthen debt management capacity, formulate medium-term debt management strategy, link to borrowing decisions, enhance capacity of the debt unit. - Challenge: Congo is in debt distress requiring urgent actions. - Governance and Anti-corruption: - Reduce financial sector vulnerabilities; ensure bank resolution follows best international practice; operationalize laws and decrees to improve governance and fight corruption. - Challenge: political will to advance reforms quickly. *Source: IMF staff report "Conclusions", 1cogea2021001 - Conclusions.* ### 3. Absorption, implementation capacity, and insufficient ownership remain the major ### 3. Absorption, implementation capacity, and insufficient ownership remain the major ### Risks and challenges - Slow implementation of previous TA recommendations has been a consistent feature; absorption, implementation capacity, and insufficient ownership are the major risks and challenges. - Political economy considerations and the support of reform-minded officials are critical to success. - Resumption of engagement under a Fund-supported program will help mitigate these risks and challenges. ### Ways to improve absorption and implementation (examples) - Present results of TA missions to a larger audience of technical staff directly involved and organize workshops to increase traction and ownership (hands-on component of TA). - Prioritize TA recommendations (relatively short and focused list of recommendations) to facilitate absorption and implementation (regular follow up by the authorities). - Improve management of local staff—avoiding high turnovers and low staffing levels—to foster continuity and help mitigate capacity and absorption constraints. - Plan and calibrate the volume and timing of TA carefully in line with the authorities’ requests to allow their strong support. ### Coordination within the Fund - The Congo team/AFR will continue close work relationships with the CD Departments on priority definitions, timing and scope of TA/CD activities. ### Engagement with outside partners - IMF staff will enhance collaboration with other international partners in the provision of TA; conducting more outreach will help mitigate risks. - Outreach activities conducted by the IMF Resident Representative will facilitate coordination and consultation among the government, Fund staff, and other stakeholders. - Some international partners already involved in TA: WB, AfDB, UN, French Development Agency (areas: PFM, improving revenues and transparency of public finances, poverty analysis, cash transfers). - The IMF Resident Representative, in coordination with IMF TA missions, would organize wrap-up or periodic meetings with other international partners to brief them on planned and outcome of missions and enhance coordination with the authorities. ### Priorities by Department (selected entries; Topics, Ratings, Objectives) - FAD — Public Financial Management (Rating 1) - Strengthen budget formulation and implementation, including the medium–term budget framework, cash management, and commitment controls. - Improve financial reporting (TOFE and Treasury Accounts): enhance comprehensiveness of budget execution reports, reduce lag in publication, improve the Budget Guidelines document, provide estimates of fiscal risks exposure. - Review expenditure chain to improve spending efficiency. - Develop strategy and timetable to reduce oil, water and electricity subsidies while protecting the most vulnerable segments of society. - FAD — Tax Policy (Rating 2) - Broaden the non-oil revenue base with a view to reducing reliance on volatile oil revenues and supporting fiscal consolidation. - Streamline custom procedures to support diversification of exports. - FAD — Revenue Administration (Rating 3) - Develop and implement a medium-term revenue strategy to increase the non-oil tax revenues as a percentage of non-oil GDP. - Enhance revenue mobilization and governance in a business-friendly way and strengthen compliance management and adopting risk-based procedures. - MCM — Debt Management (Rating 1) - Strengthen debt management capacity, formulate and implement a medium-term debt management strategy that limits risks. - Enhance integration between the MTDS and the annual borrowing plan. - Delineate responsibilities for debt management and strengthen capacity of the debt unit in the Ministry of Finance. - MCM — Financial Crisis Management (Rating 2) - Conduct targeted on-site examinations to ensure implementation of banks’ NPLs reduction strategies. - Reduce financial sector vulnerabilities and ensure resolution of banks under stress follows best international practice. - STA — Real Sector Statistics (Rating 1) - Improve quality and reporting of national accounts data, including the informal sector. - Reconcile national account and BOP and fiscal data. - STA — External Sector Statistics (Rating 2) - Produce timely annual BoP data, start producing quarterly BoP statistics and the IIP data. - STA — Government Finance Statistics (Rating 3) - Improve the quality and reporting of fiscal and debt data. - LEG — Governance and Anti-corruption - Support authorities’ efforts to improve governance and fight corruption by helping to address deficiencies in the statutory framework upon request of the authorities. ### Debt sustainability — key findings and vulnerabilities - The Debt Sustainability Analysis (DSA) prepared jointly by IMF and IDA staff finds the overall and external debt of the Republic of Congo classified as “sustainable” but currently “in debt distress” pending finalization of debt restructuring agreements with two private sector creditors and clearance of arrears. - Factors motivating change in sustainability assessment: - Higher oil prices, restructured debt, fiscal discipline, and improved debt management—including restricting new external financing to concessional terms—result in all external liquidity and solvency indicators falling below thresholds by 2026. - Projections of growth in the non-oil economy, coupled with increased debt service (tied to high oil prices), are expected to reduce the public debt-to-GDP ratio and support no new accumulation of domestic arrears. - Major risks and caveats: - PV of public debt to GDP indicator exceeds its benchmark for the full horizon. - External debt-service-to-revenue breaches its threshold through 2025. - Assessment of sustainability relies on: i) steady and significant declines in relevant ratios going forward, ii) availability of financing from Congolese financial markets, and iii) access to the CEMAC regional financial markets. - The DSA is highly vulnerable to negative oil price shocks. - Policy recommendations: - Continue pursuing fiscal consolidation. - Enact policies for diversification to reduce risks and prepare for reduced long-term oil production and demand. - Finalize pending restructuring agreements, clear arrears, and continue enhancing debt management. ### Public debt coverage and contingent liabilities - DSA coverage: limited to central government debt, but includes oil-backed debt contracted by the national oil company (SNPC). - Non-guaranteed SOE debt estimated at 9 percent of GDP; stress test assumes half could end up on the central government balance sheet. - Total PPP capital stock estimated at 4.6 percent of GDP, with 35 percent of this stock assumed to end up on the government balance sheet under the stress test. - Contested domestic arrears: about 7 percent of GDP (legally contested after audit rejection). - Newly rejected domestic arrears claim under current audit: about 12 percent of GDP (could be legally contested). - External arrears claim currently being litigated: 2.7 percent of GDP (not included in debt stock baseline but included in contingent liability stress test). - Text Table 1 aggregated contingent liabilities (as percent of GDP): total (2+3+4+5) = 38.7 percent of GDP (breakdown includes PPP 1.6 percent, financial market 5 percent, other elements 27.6 percent, SOE’s debt 4.5 percent). ### Background — evolution and composition of public debt (key numbers) - Public debt reached 101 percent of GDP at end-2020, from 82 percent of GDP at end-2019. - External debt: increased from 57 percent of GDP at end-2019 to 63 percent of GDP at end-2020. - Large share owed to China and Chinese companies: 23 percent of GDP. - Oil traders: 17 percent of GDP. - External arrears and restructurings: - January 2020: authorities paid US$69 million in arrears to multilateral and official bilateral creditors. - Additional US$146 million in arrears with bilateral creditors rescheduled under the 2020 DSSI. - Additional US$175 million (including US$132 million under DSSI from China) rescheduled in 2021. - $26 million in arrears to Chinese infrastructure companies repaid in Q4 2020. - $231 million in external commercial arrears rescheduled as part of restructuring agreements (as of end-2020). - Arrears of $536 million to one private creditor remain unresolved. - Authorities contest $402 million of arrears to suppliers (US$387 million in broader litigation case; US$15 million pre-HIPC arrears). - Authorities plan to resolve remaining external arrears to commercial suppliers (US$5 million) during 2021. - Domestic public debt: increased from 25 percent of GDP at end-2019 to 38 percent of GDP at end-2020. - Components at end-2019 included: arrears being audited (8.7 percent of GDP), statutory advances from regional central bank (9.6 percent of GDP), pension arrears and unpaid social benefits (6.5 percent of GDP). - Authorities secured financing from a pool of Congolese banks (“Club de Brazzaville”) to cover repayment of CFAF 332 billion (5.1 percent of GDP) of domestic arrears by end-2020. - Government debt to commercial banks increased to 6 percent of GDP given new bond issuance in 2019 and Q1–Q3 2020. ### Recent restructurings reflected in the DSA - Restructuring agreements with two external private commercial creditors (oil traders) included nominal haircuts, maturity extensions, and interest rate reductions for the large oil trader signed in 2021Q1 and a substantial nominal haircut for the smaller oil trader signed in April 2020 (which also resolved US$61 million in external arrears). - The DSA does not incorporate an AIP reached in early 2021 with another large oil trader that has not yet been approved by underlying lenders; instead, the DSA includes the original agreement and repayment of arrears during 2022–25. - The DSA does not incorporate terms of a formal December 2020 restructuring proposal made by the authorities to another external commercial creditor (awaiting a formal response); the DSA includes the original agreement. *Source: 1cogea2021001 (Republic of Congo — IMF staff report excerpt).* ### 5. This debt sustainability analysis also incorporates the impact of the G20 Debt Service ### 1cogea2021001 - 5. This debt sustainability analysis also incorporates the impact of the G20 Debt Service ### Impact of the G20 Debt Service Suspension Initiative (DSSI) - Under the DSSI, the authorities obtained relief of US$146 million of debt service due to bilateral creditors between May and December 2020 (equivalent to 1½ percent of GDP), that was rescheduled under NPV-neutral terms. - Under the extension of the DSSI to end-December 2021, an additional US$175 million of debt service is eligible for rescheduling, including $132 million already rescheduled by China. - The authorities committed to devoting the resources freed by this initiative to increase spending to mitigate the health, economic, and social impact of the COVID-19 pandemic. - The DSA includes the rescheduling—according to published terms—of all eligible debt, with the exception of debt under the Strategic Partnership loans from China, which the creditors have not agreed to reschedule and for which the authorities have continued making repayments. ### Debt stocks and creditor composition (selected figures from tables) - Total end-2016 stock: CFAF 436.0 billion. - Total end-2017 stock: CFAF 453.0 billion. - Total end-2018 stock: CFAF 793.1 billion. - Total end-2019 stock: CFAF 1,246-510? (table formatting indicates complex entries; preserve source raw presentation). - End-2020 stock (USD million and percent of GDP reported in table): several entries such as 489.8(?), 4878(?), 1455(?), 13.27(?), 301354(?), 12.3(?). (Source table contains many fragmented line items; refer to original table for full layout.) - Bilateral creditors (selected): end-2016: CFAF 109.0 billion; end-2017: CFAF 132.2 billion; end-2018: CFAF 13.4 billion; end-2019: CFAF 145.7 billion; new arrears 2019: 36.8; new arrears 2020: 182.4; various entries show repayments/reschedulings across years. - Paris Club (selected): end-2016: CFAF 11.5 billion; end-2017: CFAF 19.1 billion; end-2018: CFAF 30.6 billion; end-2019: CFAF 29.7 billion; other entries include 60.3, 39.6, 99.9, 169.2, 1.3, -58.8, 41.1, 76.2, 0.7. - China: table shows entries including 0.0 and 7.4, with notes earlier that $132 million already rescheduled by China under DSSI extension. - Private creditors (selected): end-2016: CFAF 322.1 billion; new arrears figures and large movements noted including -5.6, 316.5, 777.1, 1,093.6, -548.4, 545, 924, 7,247.3, 11,966.5, 1233.1, 11.2, etc. - CMEC and Chinese companies: entries include 36.2, 28.0, 64.2, -63.8, 0.4, 7.3, 81, 30.1, -800, 0.0. - Oil traders and suppliers show large arrears/rescheduling dynamics (table entries include 22.4, 22.4, 4838.9, 861.4, -566.0, 2955003.9, 141436809.7, 7.4, 436809.7, 7.4; and suppliers 285.9, -56.0, 229.9, 231.6, -1.2, 2303903.1, -2228423.5, 3.8, 228.2, 423.5, 3.8). - Notes: The source table contains fragmented and complex line items; numbers above are preserved exactly as presented in the source text. ### Weaknesses in public debt management and reporting - Authorities published terms of the 2019 debt restructuring agreement with China, but operationalization implied lower short-term liquidity relief than initially assessed. - Authorities continued accumulating excess deposits in the escrow account in China during 2020. - Emergence of a contested claim increased the stock of contingent liabilities; this claim has been included in the ongoing audit of domestic arrears. - Technical assistance in the areas of debt management and reporting is underway in the context of the Multipronged Approach to Debt Management. ### Macroeconomic outlook assumptions (Box 1 and main assumptions) - Growth: - Growth in 2020 was substantially lower than forecast in the 2019 Article IV due to the pandemic’s effects on oil production and the non-oil sector. - Growth is expected to peak at 6.3 percent of GDP in 2024, primarily on the back of increased oil production. - Over the long-term growth will average 1.5 percent driven by declining oil production as oil reserves deplete. - Vaccination: - Government aims to cover 60 percent of the population by mid-2022. - Vaccination program cost: $88 million (0.7 percent of GDP, 2021 Article IV Staff Report, Text Table 1). - World Bank and African Union financing: EVAX scheme covers one million people with $12 million in WB financing. China and Russia cover 1.1 million people. - Non-oil sector: - Non-oil real GDP projected to grow 0.9 percent in 2021. - Non-oil growth gradually improves to 3.6 percent by 2026 (averaging 3.1 percent during 2021–26). - Beyond 2026, non-oil growth projected to average 3.6 percent (historical average over 2008–17: 5.3 percent). - GDP expected to contract briefly in 2028 and 2029 due to reduced oil production; rebound thereafter. - Oil production and prices: - Oil production declined to 112 million barrels in 2020 (from 140 million barrels projected in the 2019 Article IV). - Production projected to peak at 125 million barrels by 2024; then steadily decline to about 11 million barrels in 2041, barring new discoveries. - Inflation: - Overall inflation expected at 2.7 percent (y/y) at end-2021; gradually increase to 3 percent by 2023 and remain close to 3 percent long-term. - Current account: - Current account surplus of 12.1 percent of GDP anticipated for 2021, up from balanced (-0.1 percent of GDP) in 2020. - Current account deficit projected to reach an average of 16 percent of GDP over 2028–41. - Primary balance and fiscal adjustment: - Primary surplus estimated to have declined from 8 percent of GDP in 2019 to 0.1 percent of GDP in 2020. - An adjustment to the non-oil primary balance of about 4 percent of non-oil GDP is assumed over 2021–26. - Domestic arrears payments: - Authorities prioritize domestic arrears repayments while safeguarding social and domestically-financed capital spending. - A 4 percent of non-oil GDP (1 percent of GDP) improvement in the non-oil primary balance during 2021–26 is assumed to support arrears repayment and other priorities. - Disbursements and external financing terms: - Projected external disbursements reflect project loans only; BOP and budget support not expected (Text Table 2). - In 2020, disbursements were lower than previously anticipated because of delays in budget support and project financing related to the pandemic. - Decline in disbursements beyond 2026 aligns with authorities’ commitment to pursue prudent external borrowing. - DSA assumes Congo continues to obtain the bulk of new external financing on concessional terms in the medium term; grant element increases progressively and averages 43 percent over 2027–29. - After 2029, new disbursements assumed less concessional, bringing grant element to about 27 percent over 2030–40. ### Realism tools and risks - Realism tools flag risks around the forecast, but staff assesses projected growth and fiscal path to be realistic with a low fiscal multiplier since growth is essentially driven by oil sector developments. - Improvements in the primary surplus (owing to sustained consolidation efforts) is the main driver in reducing debt, with real GDP growth contributing marginally. - Realism tools show a history of large unexplained increases for external and public debt. ### Country classification and stress test scenarios - Composite indicator (CI) assessed at 2.28 based on April 2021 WEO and 2019 World Bank CPIA data, indicating a weak debt carrying capacity for Congo. - CI components and contributions (selected): - CPIA coefficient 0.385; 10-year average value 2.75; CI component 1.064; contribution 46%. - Real growth rate coefficient 2.719; 10-year average -1.29; CI component -0.04; contribution -2%. - Import coverage of reserves coefficient 4.052; 10-year average 28.998; CI component 1.18; contribution 52%. - Import coverage of reserves^2 coefficient -3.990; 10-year average 8.409; CI component -0.34; contribution -15%. - Remittances coefficient 2.022; 10-year average 0.00; CI component 0.00; contribution 0.00%. - World economic growth coefficient 13.520; 10-year average 3.078; CI component 0.421; contribution 8%. - CI Score 2.28 (100%); CI rating: Weak. - CI cutoff value for medium debt carrying capacity is 2.69. - External debt burden thresholds cited: - TOTAL public debt benchmark: PV of debt in % of GDP 35. - PV of total public debt in percent of GDP: 35. - Exports benchmark: 140. - Debt service in % of Exports: 10. - Debt service in % of Revenue: 14. ### External Debt Sustainability Analysis: baseline and stress results - Baseline: - Under the baseline, breaches of the PV of debt-to-GDP and both external debt service indicators vis-à-vis Congo’s indicative thresholds are contained within 5 years. - Under current terms on the already restructured debt, all threshold breaches will be eliminated by 2026 under baseline scenarios. - PV of external debt to GDP is 62 percent at end-2020 and is projected to decline but remain above the indicative threshold of 30 percent only until 2023. - Debt service-to-revenues ratio: 34 percent in 2020 (above 14 percent threshold); projected to decline to 15¾ percent in 2025 and to 10 percent in 2026. - Debt service-to-exports ratio: currently above 10 percent threshold; projected to decline below 10 percent by 2025 and remain below thereafter. - PV of debt-to-exports ratio is below its indicative threshold and projected to decline to an average of 44 percent over 2026-31. - Stress tests: - All indicators of external public debt breach their indicative thresholds in stress test scenarios. - Exports shock is the most extreme for most indicators; a decline in exports to one standard deviation below historical average in years 2–3 would cause PV of debt-to-exports to rise and remain elevated; PV of debt-to-GDP would peak at 89 percent. - For debt service-to-revenue ratio, a combined shock has the largest impact. - Commodity price shock (triggered due to oil reliance) leads to prolonged breaches of liquidity indicators and PV of debt-to-GDP. - Market financing risk module indicates a moderate risk of heightened liquidity pressures; however, because there are no plans to access international markets, a heightened market stress event would not have a substantial impact on debt burden indicators. ### Debt distress classification and arrears - Reflecting unresolved external arrears and ongoing restructuring negotiations, the Republic of Congo is classified to be “in debt distress”. - Pending confirmation of DSSI implementation for all eligible debt, nearly all post-HIPC bilateral official arrears have been cleared by end-2020. - Clearance of remaining external arrears—primarily with suppliers—and finalization of debt restructuring agreements with two private sector creditors would be required to end the ongoing episode of debt distress. *Source: IMF staff report (Republic of Congo DSA text provided).* ### 14. An analysis of the Republic of Congo’s overall public debt highlights heightened ### 1cogea2021001 - 14. An analysis of the Republic of Congo’s overall public debt highlights heightened ### Debt vulnerabilities and projected evolution - The present value of public and publicly guaranteed debt-to-GDP (including domestic arrears and direct financing from BEAC) remains significantly above the 35 percent benchmark level associated with heightened vulnerabilities for countries with a weak debt carrying capacity until 2031 and then remains slightly above the threshold for the full horizon. - Even though the PV of public debt breaches its benchmark for the full horizon, it is assessed as sustainable given: - its downward path on going forward; - availability of financing from Congolese financial markets; and - access to the CEMAC regional financial markets. - Immediate liquidity needs are also supported by the DSSI. - The exports shock stress test is identified as the most extreme for public debt burden indicators, highlighting downside risk related to the oil sector. ### Risk rating and sustainability assessment - The overall and external debt of the Republic of Congo are assessed to be sustainable but debt is currently in distress. - The assessment of debt distress reflects ongoing debt restructuring negotiations with two commercial creditors and outstanding arrears. - Owing to higher oil prices and the downward trend in all the debt and solvency indicators: - the breach in the debt service-to-revenue indicator is contained by 2026; and - the breach in the present value of external debt-to-GDP indicator is below the threshold by 2023. - If there is no new accumulation of domestic and external arrears, these developments result in the overall and external debt being sustainable. ### Remaining risks and vulnerabilities - Risks of overall and external debt distress remain high given liquidity risks and vulnerability to negative oil price shocks. - Liquidity risks are associated with: - an elevated public debt-to-GDP ratio (exceeding the threshold through 2040); and - a large external debt service-to-revenue ratio (the indicator exceeds the threshold through 2025). - These liquidity risks are mitigated by: - steady and significant declines in these ratios going forward; - the DSSI; - availability of financing from Congolese financial markets; and - enhanced access to the CEMAC regional financial market. ### Stress tests and scenario results - Stress tests indicate the exports shock is the most extreme for public debt burden indicators. - Notes on stress-test assumptions: - All the additional financing needs generated by the shocks under the stress tests are assumed to be covered by PPG external MLT debt in the external DSA. - Default terms of marginal debt are based on baseline 10-year projections. - The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. - Figures and horizons referenced: indicators under alternative scenarios, 2021–31. ### Drivers of debt dynamics (baseline) - Figures present decomposition of drivers for External Debt and Public Debt under the baseline scenario, including: - Debt-creating flows and unexpected changes in debt (past 5 years, percent of GDP). - Contributions from: Residual, Price and exchange rate, Real GDP growth, Nominal interest rate, Current account + FDI, Change in PPG debt. - For Public Debt: contributions of Primary deficit, Real interest rate, Real GDP growth, Real exchange rate depreciation, Other debt-creating flows, Residual. ### Fiscal realism and adjustment tools - Realism tools presented include: - 3-Year Adjustment in Primary Balance (Percentage points of GDP) using historical Fund-supported program data. - Fiscal Adjustment and Possible Growth Path (shows annual projected fiscal adjustment and possible real GDP growth paths under different fiscal multipliers). - Public and Private Investment Rates (Percent of GDP) with a note that methodology changes in the price index affect computed investment at constant prices. - Contribution to Real GDP growth (Percent, 5-year average). - Data coverage note: Data for the 3-year adjustment covers Fund-supported programs for LICs (excluding emergency financing) approved since 1990. ### Authorities’ position and policy recommendations - The authorities concurred with staff’s assessment that Congo is in debt distress, and that debt is sustainable owing to favorable oil prices and the authorities’ reform efforts. - Authorities' commitments and views: - Maintain prudent fiscal and debt management policies. - Continue pursuing their strategy to restructure Congo’s public debt to enhance debt sustainability. - Keep macroeconomic assumptions underpinning the DSA analysis, including projections for oil production, appropriately cautious while information on new oil discoveries is still being analyzed. - Acknowledge downside risks to the growth outlook but emphasize potential benefits from development of new sectors, increased social spending, and diversification efforts to cope with challenges facing the oil sector in the context of climate change. - Staff encouragement to the authorities: - Continue pursuing fiscal consolidation. - Enact policies for diversification to reduce risks and prepare for reduced long-term oil production and demand. - Finalize the pending restructuring agreements, clear arrears, and enhance debt management. *Based on country authorities’ data and IMF staff estimates and projections contained in the document.* ### 2.5 percentage points of GDP in ### 1cogea2021001 - 2.5 percentage points of GDP in ### Market-financing risk indicators - Figure highlights market-financing risk indicators for Republic of Congo for 2015–2022 with multipliers: Baseline, Multiplier = 0.2, Multiplier = 0.4, Multiplier = 0.6, Multiplier = 0.8. - Bond trading detail (as on August 11, 2021): - Bond due 2029 was trading at a discount of 20 percent over par. - Interest yield: 7.6 percent. - Interest spread: 655 bps. - Maximum gross financing needs (GFN) noted as over a 3-year baseline projection horizon; GFN benchmark breach flagged as "No". - EMBI spreads: EMBI data not available for Republic of Congo; EMBI value shown as 570 (values and availability indicated as n.a. for some items). ### External Debt Sustainability — Baseline Scenario (Table 3, 2018–41) - External debt (nominal) series (Percent of GDP): 2018: 55.0; 2019: 56.9; 2020: 63.2; 2021: 49.9; 2022: 42.8; 2023: 37.1; 2024: 31.3; 2025: 27.2; 2026: 25.7; 2031: 22.5; 2041: 46.4; (table lists more years across projections). - Change in external debt: -9.4; 1.9; 6.3; -13.3; -7.1; -5.7; -5.8; -4.1; -1.5; -0.7; -1.0 (series by year). - Identified net debt-creating flows: -14.4; -0.3; 11.0; -16.4; -12.7; -8.5; -8.0; -3.9; -0.6; 8.6; 20.4; -1.0; -2.7 (series). - Non-interest current account deficit (percent of GDP): -1.5; -3.3; -0.6; -13.2; -8.2; -3.2; -1.8; 0.5; 3.3; 11.7; 22.7; 4.5; 1.4. - Deficit in balance of goods and services: -13.3; -14.3; -8.4; -22.2; -17.9; -12.7; -11.7; -8.2; -4.7; 6.7; 21.6; -1.9; -6.5. - Exports (percent of GDP): 71.1; 68.4; 54.9; 67.5; 65.6; 61.7; 60.9; 56.5; 51.8; 32.6; 11.1. - Imports (percent of GDP): 57.8; 54.1; 46.5; 45.4; 47.7; 49.0; 49.3; 48.3; 47.1; 39.4; 32.6. - Net FDI (negative = inflow): -2.5; -3.5; -2.7; -4.2; -4.6; -5.2; -4.7; -4.4; -4.1; -3.2; -2.0; -8.5; -4.1. - Endogenous debt dynamics (contribution): -10.4; 6.6; 14.3; 1.1; 0.1; -0.2; -1.5; 0.0; 0.3; 0.1; -0.2. - Contribution from nominal interest rate: 1.6; 2.9; 0.8; 1.0; 1.2; 0.9; 0.7; 0.5; 0.4; 0.3; 0.2. - Contribution from real GDP growth: 2.5; 0.3; 5.8; 0.1; -1.1; -1.1; -2.2; -0.5; -0.1; -0.2; -0.4. - Residual (including exceptional financing): 5.0; 2.2; -4.8; 3.1; 5.6; 2.9; 2.1; -0.2; -0.9; -9.3; -21.4; 5.5; -1.0. - Sustainability indicators (selected): - PV of PPG external debt-to-GDP ratio (selected years): 61.4; 45.3; 38.1; 32.3; 26.4; 22.2; 20.7; 18.0; 10.4. - PV of PPG external debt-to-exports ratio (selected): 111.7; 67.1; 58.2; 52.3; 43.4; 39.3; 40.0; 55.2; 93.7. - PPG debt service-to-exports ratio: 8.6; 9.7; 12.0; 11.5; 12.8; 11.6; 9.9; 9.1; 4.6; 4.4; 9.6. - PPG debt service-to-revenue ratio: 24.6; 25.5; 31.9; 34.5; 33.6; 29.5; 24.7; 21.5; 10.2; 6.7; 5.4. - Gross external financing need (Million of U.S. dollars): 286.2; -32.6; 340.3; -1353.3; -578.6; -160.6; -66.1; 188.5; 238.9; 1831.5; 6765.4 (series across years as reported). - Key macro assumptions: - Real GDP growth (percent): -4.8; -0.4; -8.2; -0.2; 2.3; 2.7; 6.3; 1.6; 0.4; 0.8; 3.4; -1.4; 1.3. - GDP deflator in US dollar terms (change in percent): 29.1; -5.9; -12.1; 22.9; 1.9; 1.3; 1.6; 2.0; 2.2; 2.9; 3.0; 0.5; 4.2. - Effective interest rate (percent): 3.1; 5.0; 1.1; 1.9; 2.4; 2.2; 2.0; 1.8; 1.4; 1.2; 1.5; 1.8; 1.6. - Growth of exports of G&S (US$ terms, percent): 48.9; -9.9; -35.2; 50.9; 1.3; -2.1; 6.7; -3.9; -5.9; -7.0; -15.1; -0.1; 1.6. - Growth of imports of G&S (US$ terms, percent): 30.3; -12.3; -30.7; 19.7; 9.6; 7.0; 8.7; 1.6; 0.1; -0.7; 6.0; -2.1; 4.0. - Government revenues (excluding grants, percent of GDP): 24.8; 26.0; 20.6; 22.4; 25.0; 24.4; 24.5; 23.8; 23.2; 21.4; 19.6; 30.0; 23.3 (table formatting shows series and some placement). - Aid flows (Million US$): 190.1; 250.8; 475.4; 167.5; 234.8; 266.0; 285.5; 322.0; 309.1; 259.8; 360.0. - Grant-equivalent financing (percent of GDP): 0.7; 1.1; 1.2; 1.2; 1.3; 1.3; 1.2; 1.1; 1.2 (selected years). - Nominal GDP (Million US$) listed for multiple years including: 13,649; 12,791; 10,329; 12,676; 13,218; 13,758; 14,856; 15,400; 15,804; 18,422; 31,154. - Nominal dollar GDP growth series includes: 22.9; -6.3; -19.2; 22.7; 4.3; 4.1; 8.0; 3.7; 2.6; 3.7; 6.5; -0.8; 5.5. - Memorandum: - PV of external debt (Million US$): 6,337.2; 5,740.4; 5,041.8; 4,437.2; 3,925.3; 3,420.1; 3,272.4; 3,320.5; 2,323.9 (selected). - (PVt-PVt-1)/GDPt-1 (percent): -5.8; -5.5; -4.6; -3.7; -3.4; -1.0; 0.2; -0.1. ### Public Sector Debt Sustainability — Baseline Scenario (Table 4, 2018–41) - Public sector debt (Percent of GDP): 2018: 77.1; 2019: 81.7; 2020: 101.0; 2021: 86.1; 2022: 77.3; 2023: 73.1; 2024: 65.6; 2025: 62.9; 2026: 62.3; 2031: 50.7; 2041: 63.8. - Change in public sector debt: -17.1; 4.6; 19.4; -14.9; -8.9; -4.2; -7.5; -2.8; -0.5; -2.2; -1.5. - Identified debt-creating flows: -17.4; -2.5; 15.9; -13.7; -7.0; -4.8; -8.1; -3.5; -2.3; -2.2; -4.4; 4.1; -4.9. - Primary deficit (percent of GDP): -7.6; -7.9; -0.1; -2.9; -5.4; -4.2; -5.1; -3.5; -2.9; -2.1; -3.5; 0.9; -3.5. - Revenue and grants (percent of GDP): 24.9; 26.7; 22.2; 22.6; 25.5; 24.9; 25.0; 24.5; 23.9; 22.2; 20.4; 30.0; 23.3. - Primary (noninterest) expenditure (percent of GDP): 17.3; 18.8; 22.1; 19.8; 20.1; 20.7; 20.0; 21.0; 21.0; 20.1; 16.9; 31.4; 20.4. - Automatic debt dynamics: -9.8; 5.5; 16.5; -12.3; -1.6; -0.6; -3.1; 0.0; 0.6; -0.1; -0.8. - Contribution from interest rate/growth differential: -0.5; 2.6; 12.1; -6.0; -1.6; -1.1; -3.4; -0.1; 0.7; 0.1; -0.7. - Contribution from average real interest rate: -5.3; 2.3; 4.8; -6.1; 0.4; 0.9; 0.9; 0.9; 0.9; 0.5; 0.6. - Contribution from real GDP growth: 4.8; 0.3; 7.3; 0.2; -1.9; -2.0; -4.3; -1.1; -0.2; -0.4; -1.3. - Residual: 0.3; 7.0; 3.5; -7.4; -1.9; 1.2; 0.9; 0.9; 1.7; -0.2; 2.7; 1.7; -0.3. - Sustainability indicators: - PV of public debt-to-GDP ratio (selected): 95.4; 81.7; 72.4; 68.1; 60.7; 57.9; 57.3; 46.1; 34.9. - PV of public debt-to-revenue and grants ratio (selected): 429.0; 360.8; 283.8; 273.2; 242.5; 236.5; 240.2; 207.4; 170.8. - Debt service-to-revenue and grants ratio: 30.4; 27.4; 65.1; 56.5; 65.0; 61.3; 61.2; 66.2; 64.4; 57.3; 47.9. - Gross financing need: 0.0; -0.6; 13.9; 7.9; 10.5; 10.4; 10.3; 12.7; 12.5; 10.6; 6.3. - Key macro and fiscal assumptions (selected): - Real GDP growth (percent): -4.8; -0.4; -8.2; -0.2; 2.3; 2.7; 6.3; 1.6; 0.4; 0.8; 3.4; -1.4; 1.3. - Average nominal interest rate on external debt (percent): 2.9; 5.2; 1.1; 1.8; 2.4; 2.2; 2.0; 1.8; 1.4; 1.2; 1.5; 1.9; 1.6. - Average real interest rate on domestic debt (percent): -18.0; 2.1; 18.1; -13.6; 1.5; 2.9; 3.1; 3.1; 3.0; 2.2; 2.6; 1.0; 1.0. - Inflation rate (GDP deflator, percent): 23.4; -0.7; -13.7; 17.5; 0.8; -0.1; 0.4; 0.9; 1.5; 2.9; 3.0; 1.4; 3.2. - Primary deficit that stabilizes the debt-to-GDP ratio (percent): 9.5; -12.5; -19.5; 12.0; 3.5; 0.0; 2.4; -0.7; -2.4; 0.1; -2.0; -7.5; 1.0. ### Sensitivity Analysis — Key Indicators (Tables 5 and 6) - Table 5: Sensitivity analysis for PPG external debt indicators, 2021–31: - Baseline PV of debt-to-GDP ratio (percent) across 2021–31 shows values such as 45; 38; 32; 26; 22; 21; 19; 19; 19; 18; 18. - Alternative scenarios, bound tests, and tailored tests presented (A1, B1–B6, C1–C4) with numerous scenario-specific values; threshold values indicated (e.g., Threshold 30 for certain indicators). - Market Financing (tailored test C4) replicates baseline series: 45; 38; 32; 26; 22; 21; 19; 19; 19; 18; 18. - Table 6: Sensitivity analysis for public debt indicators, 2021–31: - Baseline PV of debt-to-GDP ratio (percent) across 2021–31: 81; 73; 69; 61; 59; 58; 56; 53; 51; 50; 48. - Public debt benchmark: 35 (repeated across years). - A range of scenario outcomes (A1, B1–B6, C1–C4) with large variations in PV of Debt-to-Revenue Ratio, Debt Service-to-Revenue Ratio, PV of Debt-to-GDP Ratio. - Notable scenario outputs: under some scenarios PV of Debt-to-Revenue reaches values above 300 and even above 600 in long-run projections; Market Financing (C4) replicates baseline public debt series: 81; 73; 69; 61; 59; 58; 56; 53; 51; 50; 48. ### Macroeconomic outlook, risks, and policy recommendations (excerpts from Executive Director statement and staff report) - Recent developments and outlook: - Real GDP growth projected to improve to -0.2 percent in 2021 from -8.2 percent in 2020. - Non-oil GDP growth expected to reach 0.9 percent in 2021 from -8 percent in 2020. - Inflation forecast: 2 percent in 2021. - Non-oil primary deficit expected to widen to 17 percent of non-oil GDP in 2021 from 15.2 percent in 2020. - Current account projected to improve to a surplus of 12.1 percent in 2021 after a deficit of -0.1 percent in 2020. - Risks highlighted: - Delta variant of COVID-19, oil price volatility, and climate change impacts on agriculture and food security. - Vulnerabilities from elevated public and external debt and presence of external arrears. - Fiscal policy guidance and authorities’ intentions: - Continue fiscal consolidation to achieve sustainable fiscal and debt positions; need to reach substantive agreement with commercial creditors to reduce external debt. - Authorities plan a slightly wider non-oil primary deficit than initially planned to support recovery by accommodating domestic arrear repayments and necessary investments in health, education, and productive infrastructure. - Donor community urged to resume budget support and project financing to preserve social and infrastructure spending and aid clearance of arrears. - Financial sector and structural reforms: - Ongoing clearance of domestic arrears and improved liquidity have reduced banking sector vulnerabilities; however, solvency concerns and elevated NPLs persist. - Structural priorities: bolstering governance, anti-corruption framework (new anti-corruption law pending), transparency in oil sector management, economic diversification away from oil, investment in transport and power infrastructure, and improved public financial management (PFM). - Debt situation and program engagement: - Updated DSA indicates restoration of debt sustainability owing to debt repayments/restructuring and rebound in oil prices, enabling potential re-engagement with IMF for a new ECF arrangement. - Authorities recognize debt situation remains fragile; they continue to seek repayment agreements for external arrears and to negotiate with commercial creditors, notably oil traders, for restructuring commercial debt. *Source: Republic of Congo — Staff Report for the 2021 Article IV Consultation, Informational Annex (September 10, 2021).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1cogea2021001.pdf_