## 1codea2023002

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### Recent economic developments and context
- Security and natural disasters:
  - Armed groups’ attacks intensified in Eastern DRC, displacing more than 1 million people since March 2022.
  - Heavy flooding and landslides in May caused at least 400 deaths and further displacement.
  - Zambia banned corn flour exports, a staple in DRC.
- Political timing:
  - Looming elections scheduled by end-2023 (though delays cannot be excluded) increase uncertainty and challenge program performance.
- Growth and sectoral dynamics:
  - Growth is estimated at 8.9 percent in 2022 (up from 6.6 percent at the time of the third review).
  - Extractive GDP: 22.6 percent (2022).
  - Non-extractive GDP: 3.1 percent (2022).
  - Mining projected contribution: mining sector growth in 2023 projected at 11.7 percent; non-mining growth in 2023 could reach 4.4 percent.
- Exchange rate and inflation:
  - Parallel rate depreciated 13 percent y-o-y against the U.S. dollar at end-April 2023.
  - Official rate’s premium to the parallel rate peaked at 14 percent at end-March and almost fully converged by early May.
  - Inflation: 13.1 percent y-o-y in December 2022; rose to 16.9 percent y-o-y in April 2023.
  - GDP deflator and consumer price projections: GDP deflator 6.3 (2022); projections include 6.1 (2023 CR No. 22/390), 11.4 (2024), 6.8 (2025). Consumer prices, period average: 9.3 (2022); 10.8 (2023 CR No. 22/390); 14.8 (2024); 7.2 (2025). Consumer prices, end of period: 13.1 (2022); 8.3 (2023 CR No. 22/390); 11.5 (2024); 6.9 (2025).

### Key macroeconomic and external statistics (selected)
- Current account and reserves:
  - Current account deficit widened to 5.3 percent of GDP in 2022 (from 1 percent in 2021).
  - Current account (memorandum series): -0.9 (2021), -1.0 (2022), -2.2 (2023), -5.3, -3.9, -5.5, -3.9, -2.8, -2.6, -2.4, -2.9 (2024–28 series).
  - Gross international reserves (GIR) reached US$4.5 billion at end-2022 (about 2 months of imports).
  - Gross official reserves (Table 2 series): 2,948 (2021), 4,206 (2022), 4,497 (2023), projected 5,269, 5,895, 6,356, 7,242, 8,104, 8,911, 10,027.
  - Private inflows of US$1.7 billion helped reserves; BCC net FX purchases amounted to US$381 million in 2022H1.
  - BCC sold US$50 million twice in January and March 2023 (its first sales since March 2021).
- Monetary aggregates (annual change in percent of beginning-of-period broad money):
  - Net foreign assets: -7.0 (2022); 11.3 (2023 CR No. 22/390); 22.9 (2024); 15.8 (2025).
  - Net domestic assets: 10.4 (2022); 7.2 (2023 CR No. 22/390); -6.0 (2024); 4.0 (2025).
  - Broad money: 3.4 (2022); 18.5 (2023 CR No. 22/390); 16.9 (2024); 19.9 (2025).
- Central government finance (percent of GDP):
  - Revenue and grants: 16.6 (2022); 16.8 (2023 CR No. 22/390); 14.8 (2024); 16.5 (2025).
  - Expenditures: 17.1 (2022); 18.3 (2023 CR No. 22/390); 16.1 (2024); 19.0 (2025).
  - Domestic fiscal balance: -1.2 (2022); -0.6 (2023 CR No. 22/390); -0.5 (2024); -0.8 (2025).
- Investment and saving (percent of GDP):
  - Gross national saving: 6.2 (2022); 10.0 (2023 CR No. 22/390); 4.6 (2024); 12.1 (2025).
  - Investment: 11.5 (2022); 14.0 (2023 CR No. 22/390); 10.1 (2024); 15.1 (2025).
- External debt metric:
  - Debt service in percent of government revenue: 6.9 (2022); 7.6 (2023 CR No. 22/390); 7.4 (2024); 7.4 (2025).

### Fiscal performance and public finances
- 2022 fiscal outturn and composition:
  - End-2022 domestic fiscal deficit estimated at 1.2 percent of GDP (in line with program commitments), 0.1 ppts wider than the third review projection.
  - Exceptional spending amounted to 2.4 percent of GDP in 2022, up by 1.1 percent of GDP relative to third review projections; about half occurred in 2022Q4 and was largely security-related.
  - Lower revenues by 0.5 percent of GDP and higher exceptional spending were partially offset by lower current spending (by 1.1 percent of GDP) and lower domestically financed investment (by 0.3 percent of GDP).
  - Overall fiscal balance (cash basis) improved relative to projection: projected -2.8 percent of GDP (3rd Review) vs actual -1.7 percent of GDP.
  - Authorities cleared 1.1 percent of GDP in domestic arrears in 2022, of which 0.5 percent of GDP to oil importers.
- Budget execution through May 2023:
  - At end-March 2023, indicative targets on domestic fiscal balance and fiscal revenue floor were missed.
  - Cumulative revenue collection by April 2023: 23 percent of annual projection (versus 32 percent average for last three years); end-May cumulative revenues reached CDF7,249 billion.
  - End-May domestic fiscal deficit reached CDF496 billion or 0.3 percent of GDP.
- Liquidity and monetary implications:
  - Government deposits at the BCC: CDF4 trillion (3 percent of GDP) in May 2022; fell to CDF0.8 trillion (0.6 percent of GDP) in February 2023, including a CDF1 trillion decline in December 2022.
  - Monetary base expanded by 38 percent in 2022 due to increases in net credit to the government and international reserves.
  - At end-January 2023, excess reserves reached CDF1.2 trillion (16 percent of banks’ total domestic-currency assets) while outstanding BCC bills were CDF170 billion.

### Program performance and conditionality
- ECF performance:
  - Extended Credit Facility (ECF) arrangement approved SDR152.3 million (on July 15, 2021); total SDR under the ECF arrangement: SDR1,066.0 million.
  - All end-December 2022 quantitative performance criteria (QPCs) were met.
  - All end-2022 indicative targets were met except two: the floor on social spending and the ceiling on BCC’s guarantees for central government loans (the latter missed due to monitoring shortcomings even though no new guarantees were issued).
  - All structural benchmarks (SBs) were met except the one related to publishing mining contracts; authorities have now published all related agreements to the renegotiated mining contract with Ventora and the contract for the Primera Gold Joint Venture (but with delays).
- QPC/IT updates and proposals:
  - Proposed lowering the end-June 2023 floor on changes in NIR from US$430 million to US$250 million.
  - New IT on ceiling of expenditure under emergency procedure proposed at 10 percent of domestically financed expenditure (end-December 2023).
  - New structural benchmarks proposed with specific end-July, end-September, end-November, and end-May-2024 dates.
- Monitoring and reporting:
  - Data reporting requirements include daily to monthly reporting across BCC, Ministry of Finance, DGDA, DGI, and others with specified reporting lags (e.g., revenue data monthly with 40 business days; quantitative performance criteria monitoring monthly with 15 business days).

### Banking sector developments and liquidity
- Credit and deposits:
  - Credit to the private sector (at constant exchange rate) grew by 46 percent and stood at 8.6 percent of GDP at end-2022.
  - FX deposits grew by 3 percent in 2022 (compared to 31 percent in 2021).
  - Deposits from the extractive sector fell by almost 60 percent.
  - Corollary: 23 percent decline of banks’ net external assets.
  - At end-2022, FX deposits and FX lending accounted for 85 percent and 95 percent of the total, respectively.
- Asset quality and profitability:
  - NPLs have risen moderately since reinstating credit quality rules in December 2021.
  - Bank net interest margins and profitability are increasing, partly due to higher dollar interest rates.
- Market developments:
  - Kenya’s KCB Group acquired 85 percent of Trust Merchant Bank in December 2022.
  - Advans Banque transformed into a microfinance institution at end-March 2023.
  - Tanzania’s CDRB Bank obtained a banking license in May 2023.

### PDL-145T (Local Development Program for the 145 Rural Territories)
- Program overview and financing:
  - Estimated cost: US$1.7 billion (2.7 percent of GDP).
  - Partially funded by the August-2021 SDR allocation: authorities saved half of the SDR allocation to strengthen international reserves and used the other half (about US$714 million) for budget support.
  - The program allocated US$511 million to build schools, health centers, and administrative buildings in 2022, and US$203 million for rural electrification in 2023.
  - Approximately CDF425 billion of the decline in deposits in December was due to transfer to commercial banks of a portion of the SDR allocation allocated to PDL-145T.
  - Government drew US$140 million in January 2023 and US$30 million in April 2023 from the remainder of the SDR allocation assigned to the Treasury.
- Implementation and governance:
  - Execution rate: 20.3 percent at end-2022; 33.7 percent at end-March 2023.
  - Implementing agencies: Bureau Central de Coordination (BCeCo), Cellule d'exécution des Financements en faveur des Etats Fragiles (CFEF), and UNDP.
  - Monitoring: joint monitoring model with detailed project sheets and geo-location publicly available; implementing agencies produce quarterly reports and authorities committed to publishing consolidated annual report on SDR allocation use.

### Outlook, projections, and risks
- Short-term and medium-term projections:
  - Real GDP growth revised up to 6.8 percent in 2023 (from 6.3 percent); projected at 4.7 percent in 2024.
  - Inflation (eop) in 2023 projected at 11.5 percent; projected to moderate to 7.1 percent by end-2024.
  - Current account projected to slightly widen to 5.5 percent of GDP in 2023 (from 5.3 percent in 2022), then narrow to 3.9 percent in 2024.
  - Medium-term (2024-28): average growth projected at 5.2 percent annually; inflation projected to revert to the BCC’s 7 percent target; current account deficit projected to narrow to 2.9 percent of GDP by end-2028.
  - GIR coverage projected to reach 3 months of imports by 2026.
- Debt and DSA:
  - Public debt ratio: public debt stock 14,224.5 (M US$) — 21.6 percent of GDP (end-2022).
  - External: 9,989.8 (M US$) — 15.2 percent of GDP (end-2022).
  - Domestic: 4,234.8 (M US$) — 6.4 percent of GDP (end-2022).
  - DSA maintains a moderate risk of debt distress.
  - IMF exposure and capacity to repay: IMF credit-to-GDP ratio projected to peak at 2.9 percent in 2024; IMF credit to GIR ratio projected to peak at 34.1 percent in 2024.
- Risks (elevated downside risks):
  - Regional conflicts: intensifying conflicts could pressure energy and food prices, disrupt trade and financial flows.
  - Global demand shocks: abrupt slowdown in China and geopolitical fragmentation could cause commodity price volatility.
  - Domestic risks: escalating conflict, election-related uncertainty could slow reforms and worsen humanitarian conditions.
  - Fiscal risks: higher public spending could generate fiscal and external financing gaps and de-anchor exchange rate and inflation expectations.
  - Climate vulnerability: floods and landslides can damage infrastructure, exacerbate food insecurity and inflation, reduce growth, and intensify displacement.

### Policy recommendations and priorities
- Fiscal policy:
  - Narrow the fiscal deficit in 2023 to support monetary policy in curbing inflation.
  - Implement spending controls and reprioritization given lower revenues and higher exceptional spending.
  - Improve spending efficiency; impose tighter controls on spending under emergency procedures; strengthen cash management to improve budget execution and create space for social and development spending.
  - Advance fiscal structural reforms: civil service reform, fuel subsidy reform, expenditure chain and Treasury functioning, public investment management, and budget credibility.
  - Specific measures and targets:
    - Limit spending under emergency procedures to 10 percent of total domestically financed expenditure by end-2023 (proposed IT); to 8 percent by end-December 2024.
    - End-December 2023 domestic fiscal deficit (QPC) proposed at CDF831 billion (0.5 percent of GDP), compared to CDF1,000 billion (0.7 percent of GDP) at third review.
    - Revenue-to-GDP ratio projected to decline to 13.7 percent of GDP in 2023.
    - Wage bill envelope to CDF7,130 billion in 2023 (IT); workforce limits and freezes specified (e.g., freeze number of civil servants under general system at 277,224).
- Monetary and financial policy:
  - Readiness to further tighten monetary stance to contain inflation; BCC committed to increase policy rate as needed.
  - BCC increased policy rate by 75 bps twice in 2022 (November and March) to 9 percent; later policy action raised policy rate to 11 percent (Monetary Policy Committee meeting cited).
  - Strengthen monetary policy framework and BCC independence and safeguards.
  - Reserve accumulation to build resilience against external shocks: aim for net accumulation of at least US$250 million in first half of 2023 and US$700 million by end-2023 (QPC targets).
  - Instruments: consider offering BCC bills on full allotment basis at policy rate; remunerate reserve requirements; use BCC bills proactively to manage short-term liquidity.
  - Reduce crystallized local-currency reserve requirement stock by CDF59 billion (2.5 percent) by end-June 2023 and another CDF59.7 billion by end-2023 (total CDF118.7 billion, 5 percent) to convert into FX reserves.
- Financial sector and supervision:
  - Revise regulations to comply with the new banking law (December 2022); publish related instructions by end-November 2023.
  - Resume on-site inspections; deploy risk-based supervision; establish stress-test committee; require preventive recovery planning (commercial banks submit by end-2024).
  - Create financial stability unit within BCC; strengthen supervision of nonbank financial institutions.
- Governance, transparency, and structural reforms:
  - Strengthen rule of law and judiciary, curb corruption, improve mining sector transparency, and improve public financial management.
  - Exit FATF grey list by implementing AML/CFT action plan; submit National Risk Assessment (submitted May 2023); sign decree creating taskforce to monitor implementation.
  - Advance revenue mobilization: broaden tax base, improve tax compliance, restore VAT functioning, modernize and digitalize revenue collection, rationalize parafiscal charges.
  - Implement resource-based fiscal framework to manage volatility from mining revenues.
- Social and climate priorities:
  - Protect social spending and scale up social spending from 0.4 to 1.6 percent of GDP over 2023-28 per SDG costing exercise.
  - Climate: implement National Adaptation Plan (NAP); prioritize nature-based mitigation and adaptation; public investment in adaptation could save output losses and stabilize public debt below 30 percent of GDP in simulations (DIGNAD model scenarios).
  - NDC financing needs: total estimated at US$48 billion (87.5 percent of GDP in 2021) during 2022-30 (US$25 billion mitigation; US$23 billion adaptation). Private finance currently only 2 percent of climate finance flows to DRC.

### AML/CFT, business climate, and institutional capacity
- AML/CFT:
  - New AML/CFT law No. 22/068 enacted on December 27, 2022.
  - Final National ML/FT Risk Assessment submitted May 2023; taskforce decree to be signed June 2023.
  - Commitments: assign supervisory authorities across sectors; resource CENAREF; strengthen investigative and prosecutorial capacity; implement targeted financial sanctions.
- Business climate and structural measures:
  - Roadmap of nearly 70 reforms coordinated by business climate unit and ANAPI covering business creation, one-stop shop, property transfer processes, trade facilitation, and judicial improvements.
  - PPP framework: commit to signing decrees implementing Law No. 18/016 by specific dates (e.g., end-June 2023, end-October 2023) and publish PPP contracts.
- Institutional capacity and statistics:
  - IMF and partners providing technical assistance; IMF Fiscal Affairs expert posted since November 2022; fiscal expert funded by Belgian cooperation.
  - BCC to publish IFRS-compliant financial statements starting FY 2023.
  - GDP rebasing and statistics updates: revised GDP series through 2019 published; update for 2020 and 2021 to be published by end-June 2023; rebasing to SNA 2008 to be launched in 2023.

### Climate change risks, opportunities, and strategy
- Vulnerability and impacts:
  - About 77 percent of the population (75 million) live in extreme poverty.
  - DRC prone to floods and landslides; infrastructure deficits amplify impacts (5 percent of roads paved; 14 percent in good condition).
  - Access to services: 19 percent access to electricity; 4 percent to clean cooking; 34 percent households access to water (19 percent in rural areas); 29 percent access to sanitation.
  - Biomass accounts for 98.8 percent of household total energy consumption.
  - Cost of disruption to power sector estimated at 1.9 percent of GDP in 2019.
  - Under an optimistic scenario, climate change could reduce DRC’s GDP by 6.5 percent by 2030 and push over an additional 3.5 million people into poverty.
- Opportunities:
  - Congo Basin forest absorbs as much as 4 percent of global emissions annually; peatlands entrap 19 billion tons of carbon; total about 42 billion tons of “irrecoverable” carbon.
  - DRC holds about 60 percent of global cobalt reserves and is top copper producer in Africa.
  - Hydroelectric potential and water resources: Congo Basin carries about 10 percent of the world's fresh water (52 percent of Africa’s).
- NDC and financing:
  - Total NDC financing needs estimated at US$48 billion during 2022-30.
  - Current climate finance flows: public/official sources 98 percent; private institutions 2 percent.
  - Priority measures to expand private climate finance include accreditation of national entities, building capacity to develop bankable projects, and establishing MRV systems.
- DIGNAD simulation outcomes:
  - Additional adaptation investment of 4 percent of GDP for five years would save about 2.5 percent of GDP in output losses relative to no-policy change scenario.
  - Improved PIM raising efficiency from 12 percent to 32 percent yields an additional saving of 1.1 percent GDP in output loss.
  - Public debt expected to stabilize below 30 percent of GDP with adaptive infrastructure investment (Scenarios 2 and 3).

### Debt, arrears, and debt-management priorities
- Arrears and stock:
  - External official arrears to four non-Paris Club creditors amount to 0.1 percent of GDP; external arrears total US$254.5 million.
  - Stock of Domestic Arrears, end-December 2022 (US$ millions and percent of GDP): Certified debt stock 4,494    2.9; Banque Centrale du Congo: 2,009    1.3; Certified and validated legacy arrears: 1,513    1.0; Stock awaiting validation: 530    0.3; Protocoles d'accord: 443    0.3; Stock awaiting certification: 3,000    1.9; Other arrears: 1,089    0.7; VAT: 670    0.4; Oil subsidy: 418    0.3; Total: 8,583    5.5.
- Public debt and DSA highlights:
  - Public debt stock (M US$): total 14,224.5 — 21.6 percent of GDP (2022).
  - External public debt-to-GDP: 15.5 percent (2022).
  - Domestic debt: 6.4 percent of GDP (2022), with domestic arrears estimated at 5.7 percent of GDP at end-2022.
  - Debt carrying capacity classified as weak; Composite Indicator (CI) 2.23.
  - Stress tests: commodity price shocks and export shocks can breach thresholds under extreme scenarios; baseline overall risk of debt distress rated Moderate.
- Debt management recommendations:
  - Prioritize concessional loans; strengthen debt management and monitoring, including SOE and provincial debt reporting; maintain prudent borrowing and preserve concessional space.

*Source: Democratic Republic of the Congo—Fourth Review Under the Extended Credit Facility, Request for Modification of Quantitative Performance Criterion, and Financing Assurances Review (IMF staff report, June 14, 2023).*

### 5.3 percent of GDP, as higher export growth only partially compensated for higher imports and

### 1codea2023002 - 5.3 percent of GDP, as higher export growth only partially compensated for higher imports and

### Recent economic developments and context
- Armed groups’ attacks intensified in Eastern DRC, displacing more than 1 million people since March 2022 and worsening food security. Heavy flooding and landslides in May caused at least 400 deaths and further displacement. Zambia banned corn flour exports, a staple in DRC.
- Looming elections (scheduled by end-2023, though delays cannot be excluded) and the security crisis in the East are creating uncertainty and challenging program performance.
- Growth remained resilient in 2022, driven by mining activity: growth is estimated at 8.9 percent in 2022 (up from 6.6 percent at the time of the third review).
- Exchange rate dynamics and inflation:
  - The parallel rate depreciated 13 percent y-o-y against the U.S. dollar at end-April 2023.
  - The official rate’s premium to the parallel rate peaked at 14 percent at end-March and almost fully converged to the parallel rate by early May (after rescinding a previous FX discount restriction).
  - Inflation rose to 16.9 percent y-o-y in April 2023, driven by higher transport, energy and food prices.

### Key macroeconomic and external statistics (selected)
- Current account and reserves:
  - Current account deficit widened to 5.3 percent of GDP in 2022 (from 1 percent in 2021).
  - Gross international reserves (GIR) reached US$4.5 billion at end-2022 (about 2 months of imports).
  - Private inflows of US$1.7 billion helped reserves; BCC net FX purchases amounted to US$381 million in 2022H1.
  - BCC sold US$50 million twice in January and March 2023 (its first sales since March 2021).
- 2022 sectoral growth:
  - Real GDP: 8.9 percent (2022).
  - Extractive GDP: 22.6 percent (2022).
  - Non-extractive GDP: 3.1 percent (2022).
- Inflation and prices (Table 1 projections and estimates):
  - GDP deflator 6.3 (2022); projections include 6.1 (2023 CR No. 22/390), 11.4 (2024), 6.8 (2025).
  - Consumer prices, period average: 9.3 (2022); 10.8 (2023 CR No. 22/390); 14.8 (2024); 7.2 (2025).
  - Consumer prices, end of period: 13.1 (2022); 8.3 (2023 CR No. 22/390); 11.5 (2024); 6.9 (2025).
- Monetary aggregates (annual change in percent of beginning-of-period broad money):
  - Net foreign assets: -7.0 (2022); 11.3 (2023 CR No. 22/390); 22.9 (2024); 15.8 (2025).
  - Net domestic assets: 10.4 (2022); 7.2 (2023 CR No. 22/390); -6.0 (2024); 4.0 (2025).
  - Broad money: 3.4 (2022); 18.5 (2023 CR No. 22/390); 16.9 (2024); 19.9 (2025).
- Central government finance (percent of GDP):
  - Revenue and grants: 16.6 (2022); 16.8 (2023 CR No. 22/390); 14.8 (2024); 16.5 (2025).
  - Expenditures: 17.1 (2022); 18.3 (2023 CR No. 22/390); 16.1 (2024); 19.0 (2025).
  - Domestic fiscal balance: -1.2 (2022); -0.6 (2023 CR No. 22/390); -0.5 (2024); -0.8 (2025).
- Investment and saving (percent of GDP):
  - Gross national saving: 6.2 (2022); 10.0 (2023 CR No. 22/390); 4.6 (2024); 12.1 (2025).
  - Investment: 11.5 (2022); 14.0 (2023 CR No. 22/390); 10.1 (2024); 15.1 (2025).
- External debt metric:
  - Debt service in percent of government revenue: 6.9 (2022); 7.6 (2023 CR No. 22/390); 7.4 (2024); 7.4 (2025).

### Fiscal performance and public finances
- 2022 fiscal outturn and composition:
  - End-2022 domestic fiscal deficit is estimated at 1.2 percent of GDP (in line with program commitments), 0.1 ppts wider than the third review projection.
  - Exceptional spending amounted to 2.4 percent of GDP in 2022, up by 1.1 percent of GDP relative to third review projections, largely security-related and half occurring in 2022Q4.
  - Lower revenues by 0.5 percent of GDP and higher exceptional spending were partially offset by lower current spending (by 1.1 percent of GDP) and lower domestically financed investment (by 0.3 percent of GDP).
  - Overall fiscal balance (cash basis) improved relative to projection: projected -2.8 percent of GDP (3rd Review) vs actual -1.7 percent of GDP.
  - Authorities cleared 1.1 percent of GDP in domestic arrears in 2022, of which 0.5 percent of GDP to oil importers.
- Budget execution through May 2023:
  - Continuation of elevated exceptional spending and under-execution in other spending amid softening revenue performance.
  - At end-March 2023, indicative targets on domestic fiscal balance and fiscal revenue floor were missed.
  - Cumulative revenue collection by April 2023: 23 percent of annual projection (versus 32 percent average for last three years); end-May cumulative revenues reached CDF7,249 billion.
  - End-May domestic fiscal deficit reached CDF496 billion or 0.3 percent of GDP.
- Liquidity and monetary implications:
  - Government deposits at the BCC fluctuated: reached CDF4 trillion (3 percent of GDP) in May 2022, fell to CDF0.8 trillion (0.6 percent of GDP) in February 2023, including a CDF1 trillion decline in December 2022.
  - Monetary base expanded by 38 percent in 2022 due to increases in net credit to the government and international reserves.
  - At end-January 2023, excess reserves reached CDF1.2 trillion (16 percent of banks’ total domestic-currency assets) while outstanding BCC bills were CDF170 billion.

### Program performance and conditionality
- Progress under the Extended Credit Facility (ECF) arrangement remains broadly satisfactory:
  - All end-December 2022 quantitative performance criteria (QPCs) were met.
  - All end-2022 indicative targets were met except two: the floor on social spending and the ceiling on central bank’s guarantees for central government loans (the latter missed due to monitoring shortcomings even though no new guarantees were issued).
  - All structural benchmarks (SBs) were met except the one related to publishing mining contracts due to delays; the authorities have now published all related agreements to the renegotiated mining contract with Ventora and the contract for the Primera Gold Joint Venture.
- Program pressures and risks:
  - Government revenue shortfalls and rapid spending contributed to a deterioration of the external balance, excess domestic currency liquidity, exchange rate depreciation, and persistent inflation.
  - The escalation of the armed conflict in the east, upcoming end-2023 elections, and adverse terms-of-trade shocks tilt risks to the downside.

### Key policy recommendations and priorities
- Fiscal policy:
  - Narrow the fiscal deficit in 2023 to support monetary policy in curbing inflation.
  - Implement spending controls and reprioritization given lower revenues and higher exceptional spending.
  - Improve spending efficiency, impose tighter controls on spending under emergency procedures, and strengthen cash management to improve budget execution and create space for social and development spending.
  - Advance fiscal structural reforms: civil service, fuel subsidy reform, expenditure chain and Treasury functioning, public investment management, and budget credibility to enhance spending efficiency and governance.
- Monetary and financial policy:
  - Readiness to further tighten the monetary stance to contain inflation.
  - Strengthen the monetary policy framework and enhance the independence and safeguards of the central bank to support price stability.
  - Reserve accumulation to build resilience against external shocks.
  - Enact regulations for the new banking law to strengthen financial supervision and resilience.
- Governance, structural, and institutional reforms:
  - Strengthen the rule of law and the judiciary, curb corruption, and improve transparency in the mining sector and public finances to improve the business climate for private investment and economic diversification.
  - Take action to exit the FATF’s grey list and implement the new AML/CFT framework.
  - Implement the country’s ambitious climate agenda given vulnerability to climate change.

*Source: Democratic Republic of the Congo—Fourth Review Under the Extended Credit Facility, Request for Modification of Quantitative Performance Criterion, and Financing Assurances Review (IMF staff report, June 14, 2023).*

### 9. Private sector credit picked up, but bank deposits stagnated in 2022 (Table 4). Credit to

### 9. Private sector credit picked up, but bank deposits stagnated in 2022 (Table 4)

### Banking sector developments and liquidity
- Credit to the private sector (at constant exchange rate) grew by 46 percent and stood at 8.6 percent of GDP at end-2022.
- FX deposits grew by only 3 percent (compared to 31 percent in 2021).
- Deposits from the extractive sector fell by almost 60 percent.
- BCC’s inspections suggest that mining companies’ repatriated export receipts transited through Congolese banks but likely ended up abroad and thus did not increase domestic deposits.
- The corollary of stagnating deposits and credit growth was a 23 percent decline of bank’s net external assets.
- Dollarization and currency composition:
  - At end-2022, FX deposits and FX lending accounted for 85 percent and 95 percent of the total, respectively.
- Asset quality and profitability:
  - NPLs have risen moderately since reinstating credit quality rules in December 2021.
  - Bank net interest margins and profitability are increasing, in part due to higher dollar interest rates.
- Market developments and sectoral activity:
  - In December 2022, Kenya’s KCB Group acquired 85 percent of Trust Merchant Bank.
  - At the end of March, Advans Banque was transformed into a microfinance institution.
  - Tanzania’s CDRB Bank obtained a banking license in May 2023.

### Local Development Program for the 145 Rural Territories (PDL-145T) — implementation and governance
- Program overview:
  - The PDL-145T is a public investment program aimed at addressing social infrastructure needs at the regional level.
  - Estimated cost: US$1.7 billion (2.7 percent of GDP).
  - Aligned with the National Strategic Development Plan, including improving access to basic infrastructure and services in rural areas.
- Implementing agencies:
  - Bureau Central de Coordination (BCeCo) — under the Ministry of Finance.
  - Cellule d'exécution des Financements en faveur des Etats Fragiles (CFEF) — under the Ministry of Finance.
  - United Nations Development Program (UNDP).
- Financing and use of SDRs:
  - PDL-145T is partially funded by the August-2021 SDR allocation.
  - Authorities chose to save half of the SDR allocation to strengthen international reserves, while using the other half (about US$714 million) for budget support.
  - The program allocated US$511 million to build schools, health centers, and administrative buildings in 2022, and US$203 million for rural electrification in 2023.
  - Note: Approximately CDF425 billion of the decline in deposits in December was due to the transfer to commercial banks of a portion of the SDR allocation allocated to the PDL-145T project (as planned).
  - In January and April 2023, US$140 million and US$30 million were drawn by the government from the remainder of the half of the 2021 SDR allocation assigned to the Treasury, thereby replenishing government deposits at the BCC and increasing the BCC’s official reserves (instead of being transferred to commercial banks); the authorities have declared that the same amounts would eventually be directed towards the PDL-145T project.
- Implementation pace and execution:
  - After a slow start in 2022, implementation is expected to accelerate in 2023.
  - Government transferred US$511 million to the agencies in 2022.
  - Most contracts were not signed until 2022H2, accounting for an execution rate of only 20.3 percent at end-2022.
  - The implementation rate reached 33.7 percent at end-March 2023.
  - Another US$203 million is planned to be made available for rural electrification in 2023.
- Capacity strengthening and governance measures:
  - Project and Program Monitoring Unit (CSPP) strengthened with a new coordination team.
  - An action plan to reinforce BCeCo’s capacity and governance is being designed based on external audits for the 2017-21 period.
  - Implementation monitoring: BCeCo, CFEF and UNDP set up a joint/communal monitoring model with detailed project sheets and geo-location for each infrastructure available to the public via internet, including identification of beneficiaries of allocated contracts.
  - Implementing agencies produce quarterly reports on project implementation; authorities committed to publishing a consolidated annual report on the use of the SDR allocation.

### Program performance, targets, and governance benchmarks
- Quantitative performance criteria (QPCs) and indicative targets (ITs):
  - All end-December 2022 QPCs were met, although some ITs have been missed.
  - The domestic fiscal balance QPC was met by a wide margin (0.7 percent of GDP) as higher repayment of domestic arrears compared to the adjustor widened the QPC.
  - The end-December 2022 NIR target was met, despite the exclusion of some encumbered assets (previously included); external auditors reassessed the stock of NIR since end-2020, with no impact on previous QPC assessment.
  - Two end-2022 ITs were missed: the floor on social spending and the ceiling on BCC deposits used as guarantees for central government loans (the latter due to monitoring shortcomings and despite no new guarantees).
  - End-March 2023 ITs on domestic fiscal balance, fiscal revenues, BCC net domestic assets, and BCC FX assets held with domestic correspondents were missed.
- Structural benchmarks (SBs):
  - All SBs were met except the one related to publishing mining contracts.
  - Authorities completed the audit certifying domestic arrears (end-December 2022 SB) and adopted the decrees on public investment management and defining the perimeter and structure of the Treasury Single Account (end-May 2023 SBs).
  - The continuous SB on publishing mining contracts was not met as additional agreements related to the contract with Ventora and the contract signed with Primera Gold were published with delays.

### Outlook and risks
- Key macroeconomic projections:
  - Real GDP growth:
    - Revised up from 6.3 to 6.8 percent in 2023 as mining output continues to contribute positively.
    - Projected at 4.7 percent in 2024 as mining production growth stabilizes.
  - Inflation:
    - Inflation (eop) in 2023 is projected at 11.5 percent.
    - Projected to moderate to 7.1 percent by end-2024.
  - Current account:
    - Projected to slightly widen to 5.5 percent of GDP in 2023 from 5.3 percent, as import growth is expected to surpass export growth.
    - Projected to narrow to 3.9 percent of GDP in 2024.
  - Medium-term projections (2024-28):
    - Average growth projected at 5.2 percent annually during 2024-28, stimulated by mining activity and progress with structural reforms.
    - Inflation projected to revert to the BCC’s 7 percent target over the medium term.
    - Current account deficit projected to narrow to 2.9 percent of GDP by end-2028.
    - GIR coverage projected to reach 3 months of imports by 2026.
    - An updated DSA maintains a moderate risk of debt distress.
- Risks (elevated downside risks):
  - Regional conflicts: intensifying regional conflicts could pressure energy and food prices, exacerbate food insecurity, and disrupt trade, supply chains, and financial flows.
  - Global demand shocks: an abrupt growth slowdown in China and geopolitical fragmentation could cause recurrent commodity price volatility.
  - Domestic risks: escalating conflict could threaten macroeconomic stability and exacerbate poverty and inequality; uncertainty ahead of elections could slow or reverse reform momentum.
  - Fiscal risks: higher public spending could generate fiscal and external financing gaps and risk de-anchoring exchange rate and inflation expectations.
  - Climate vulnerability: exposure to extreme climate events such as floods and landslides can damage infrastructure, exacerbate food insecurity and inflationary pressures, reduce growth, and intensify displacement.
- Authorities’ views:
  - Authorities agree the outlook is uncertain given the escalating conflict in the East, with downside risks dominating.
  - Authorities reiterate commitment to prudent macro policies to address additional shocks.
  - Authorities recognize that upcoming elections could delay reform efforts and that humanitarian and food insecurity conditions could worsen, but note upside risks from better-than-anticipated export volumes and terms-of-trade.
  - Authorities emphasized medium-term plans to develop mining value chains.

### Policy discussions — fiscal policy and program focus
- Overall guidance:
  - Program objectives remain unchanged, but ongoing macroeconomic pressures and looming risks call for prudent fiscal policy to preserve fiscal sustainability and macroeconomic stability, supported by tighter monetary policy to reduce inflationary pressures.
  - Over the medium term, focus remains on fiscal consolidation through mobilizing domestic revenue, curbing nonpriority spending to provide space for physical and human capital investment, enhancing spending efficiency, and building reserve buffers.
- Fiscal tightening and spending reprioritization:
  - Revenue projections have been revised downward by CDF334 billion due to lower tax collection observed so far in 2023.
  - Authorities requested a higher exceptional spending envelope, about CDF3,000 billion to allow for rapid spending to cope with immediate humanitarian and defense needs of the conflict.
  - Current spending rationalization of CDF613 billion—mostly in goods and services to preserve social spending—and lower capital spending (by CDF1,973 billion, considering the lower-execution rate) generate room to accommodate CDF1,852 billion in additional exceptional spending (60 percent of the authorities’ request).
  - The envelope for domestic arrear repayments is decreased by about CDF428 billion to clear arrears under the domestic strategy and the fuel subsidy.
  - The end-December 2023 domestic fiscal deficit (QPC) is proposed at CDF831 billion (0.5 percent of GDP), compared to CDF1,000 billion (0.7 percent of GDP) at the time of the third review, allowing for a small build-up of government deposits as a buffer (0.2 percent of GDP).
- Revenue mobilization measures:
  - Revenue-to-GDP ratio projected to decline to 13.7 percent of GDP in 2023.
  - Authorities urged to broaden the tax base; improve tax compliance; restore proper VAT functioning; modernize and digitalize revenue collection; and rationalize tax expenditures, non-tax charges, and parafiscal charges.
  - Authorities are inventorying parafiscal charges in special accounts and supplemental budget (proposed end-September-2023 SB); and will complete the second phase of the non-tax revenue rationalization plan, with sectoral ministries agreeing on the final list of taxes to rationalize and revise tax rates (proposed end-September 2023 SB).
- Spending efficiency, controls, and transparency:
  - Strengthen spending procedures and controls, including procurement, and limit Treasury’s FX payments to external obligations and recourse to emergency procedures to exceptional cases.
  - Authorities agreed to limit spending under emergency procedures to 10 percent of total domestically financed expenditure by end-2023 (proposed IT).
  - Authorities committed to continue publishing quarterly reports detailing the nature and amount of these expenditures.
  - Authorities to limit use of emergency procedures by signing the decree on public spending procedures and accounting, consistent with the Public Finance Organic Law and specified in the Budget Execution Manual (end-July 2023 SB).

*Source: IMF Democratic Republic of the Congo staff report excerpts (content unit: 1codea2023002).*

### 20. The authorities should progress on structural fiscal reforms.

### 20. The authorities should progress on structural fiscal reforms.

### Wage bill and civil service reform
- Authorities agreed to limit the wage bill envelope to CDF7,130 billion in 2023 (IT).
- An interministerial decree will specify that any salary increase must be approved jointly by the Ministers of Budget, Finance, and the Civil Service (end-July 2023 SB).
- Staff recommendations:
  - Advance cleaning of the civil service registry.
  - Review the remuneration policy to streamline bonuses.
  - Establish more equitable and merit-based compensation.

### Fuel subsidy reform
- Arrears and liabilities:
  - Accumulated arrears from 2021-22H1: about US$475 million (as of end-March 2023).
  - 2022H2 liabilities yet to be certified: estimated at US$170 million.
- Current and projected subsidy:
  - Authorities now estimate a monthly subsidy of about US$14 million.
  - On June 8, the authorities raised fuel prices by an average 5 percent to reduce the subsidy.
- Staff recommendations:
  - Remain current on obligations and publish the audit of the price structure.
  - Advance implementation of the automatic price formula.
  - Implement more timely rule-based adjustments in domestic fuel prices with smoothing to avoid excessive volatility and mitigate consumer impact.
  - Use upcoming FAD TA to renew commitment to reform the temporary and targeted nature of subsidies.

### Social spending
- Actions taken to meet social spending associated with the end-June 2023 IT.
- SDG costing exercise (five key areas: health, education, electricity, water/sanitation/hygiene, and road infrastructure) estimates:
  - Additional expenditure needs to achieve substantial progress towards SDGs by 2030: 44 percent of GDP.
  - Additional spending to eradicate extreme poverty: 28 percent of GDP.
- Staff call:
  - Protect social spending and use the report’s findings to scale up social spending from 0.4 to 1.6 percent of GDP over 2023-28.

### Public investment management
- Staff urged reinforcement of public investment management to address infrastructure gaps and climate resilience.
- Authorities’ actions and timelines:
  - Approved decree on the life-cycle of investment projects (end-May 2023 SB).
  - Working to complete decrees to implement the PPP law (end-June 2023 SB) and the manual of investment management procedures (end-December 2023 SB).
  - Establish an integrated IT system for investment projects (end-December 2023 SB).
- Urgent need to integrate FINEX expenditure associated with the PDL-145T into the budgetary expenditure chain and generate related budget monitoring reports.

### Domestic arrears clearance
- Post-December 2022 audit strategy:
  - Implement “protocoles d’accord” of US$443 million and certified and validated envelope of US$1.2 billion in 2023.
  - Set threshold for cash repayments at US$300,000; other claims to be repaid with issuance of domestic bills.
  - Gradual repayment schedule to avoid additional inflationary pressures.
  - Commitment to refrain from repaying unvalidated arrears and to only clear validated arrears while remaining current on bilateral agreements.
- Stock of Domestic Arrears, End-December 2022 (In US$ millions) and (Percent of GDP):
  - Certified debt stock at end-Dec 2022: 4,494    2.9
  - Of which Banque Centrale du Congo: 2,009    1.3
  - Certified and validated legacy arrears: 1,513    1.0
  - Stock awaiting validation: 530    0.3
  - Protocoles d'accord: 443    0.3
  - Stock awaiting certification: 3,000    1.9
  - Other arrears: 1,089    0.7
  - VAT: 670    0.4
  - Oil subsidy: 418    0.3
  - Total: 8,583    5.5

### Treasury Single Account (TSA) and public accounting
- Fully operationalizing the Directorate General of Treasury and Public Accounting (DGTCP) is critical to enhance Treasury management and implement the TSA, building on the decree defining its perimeter and structure (end-May 2023 SB).
- TSA objectives and reforms:
  - Strengthen institutional framework for cash management and adopt appropriate TSA structure and coverage.
  - Set up and strengthen DGTCP capacities to produce quality infra-annual and annual financial statements and ensure timely reporting and account reconciliation.
  - Make the public sector accountant guarantor of accounting quality and modernize internal control.
  - Centralize public funds to ensure real-time visibility of government assets and avoid pockets of "idle liquidity".
  - Improve cash flow planning via commitment plans and synchronized cash flow (plan de trésorerie) and commitment plans during budget drafting.

### Fiscal credibility, accountability, and public debt management
- Fiscal transparency and accountability:
  - Align the budget with program engagements and minimize discrepancies between budgeted and executed amounts.
  - Timely rendering of the 2022 accounts to the Court of Auditors and Parliament.
  - Publish the cash flow plan as executed in 2022 starting in July 2023.
- Public debt management:
  - Strengthen legal framework governing public debt procedures.
  - Improve monitoring of debt by the General Directorate of Public Debt (DGDP) to include timely information on SOEs’ debt.
  - Authorities finalizing a draft law to harmonize legal framework, reaffirm exclusive role of the Ministry of Finance in contracting external debt, and strengthen DGDP mandate including monitoring SOEs’ debt.

### Resource-based fiscal framework
- Challenge: Volatile resource revenues and limited transparency in extractive sector financial flows risk pro-cyclical fiscal policies.
- Staff recommendation:
  - Move toward a resource-based fiscal framework given limited visibility on extractive revenue projections and fiscal volatility.
  - The revenue adjustor on the domestic fiscal balance (IT) aims to reduce pro-cyclical spending in the absence of a non-extractive fiscal framework.

### Monetary and financial sector linkages to fiscal reforms
- Monetary stance and inflation:
  - Inflation risks de-anchoring expectations; BCC committed to further policy rate increases and quantitative instruments to manage liquidity.
  - Target: bring inflation to the 7 percent target by end-2024, absent shocks.
  - The BCC increased its policy rate by 75 bps twice, in November 2022 and March 2023, to 9 percent.
  - Staff advice: consider offering BCC bills on a full allotment basis at the policy rate; remunerate reserve requirements; enhance BCC communication.
- Reserves and FX coordination:
  - End-December 2022 net international reserves (NIR) accumulation: US$1,200 million.
  - BCC proposes revising end-June 2023 QPC to US$250 million (from US$430 million) and setting end-December 2023 NIR QPC at US$700 million.
  - Close coordination between BCC and Treasury needed; Treasury use should be limited to external payments.
- Reserve requirements and communication:
  - BCC will reduce the stock of reserve requirements on foreign deposits fulfilled in domestic currency by 2.5 percent by end-June, and another 2.5 percent by end-December 2023.
  - Publish annual calendar for MPC meetings and hold regular press conferences after monetary policy decisions.
- BCC safeguards and operations:
  - Adopt internal audit charter and procurement rules; procurement unit to be created in July 2023.
  - IFRS implementation progressing; BCC committed to issue IFRS-compliant financial statements starting with FY 2023.
  - MoU on BCC recapitalization to be signed with the government by end-November 2023 (recapitalization needs estimated at CDF2,913.7 billion).
  - Prepare plan to close all FX accounts with local correspondents by end-July 2023 (four of the eight accounts have been closed by May 2023).
  - Tighten controls and regularize transactions conducted by the BCC as fiscal agent, cap expenditures under emergency procedures, and operationalize the TSA.
- Cash operations and AML/CFT alignment:
  - BCC cash transactions as fiscal agent amounted to 1.6 percent of GDP in 2022, almost half in FX.
  - Authorities committed to publish a framework for execution of Treasury and BCC operations in line with Articles 23-24 of the AML/CFT law, including prohibiting cash transactions exceeding US$10,000 and executing all government and BCC payments by bank transfer (proposed end-May 2024 SB).
  - Align exemptions to the US$10,000 limit with FATF standards.

### Financial sector reforms and stability
- Banking law and regulatory reforms:
  - New banking law adopted December 2022; BCC will align regulatory framework to the new law (proposed end-November 2023 SB).
  - Draft regulation on related parties (end-November 2023 SB).
  - Resume onsite bank inspections and deploy risk-based supervision with IMF technical assistance.
  - Reforms planned for emergency liquidity and bank recovery and resolution framework; instruction on bank recovery by end-2023; commercial banks to submit preventive recovery planning by end-2024.
  - Create a financial stability unit within the BCC to support the Financial Stability Committee.
- Data and stress testing:
  - Inadequate data provision delays bank stress tests.

### Governance and transparency
- Anti-corruption and transparency measures:
  - Corruption remains pervasive; resistance from vested interests.
  - Progress includes March 2023 decree to disclose beneficial ownership on public procurement and steps under UNCAC Implementation Review Mechanism.
  - Updating the Journal Officiel’s website will facilitate access to legislative and regulatory frameworks.
- Mining sector transparency:
  - Authorities must disclose all mining contracts; major mining contracts are being renegotiated, with potential public finance implications.
  - Publishing all mining contracts, including renegotiated ones, remains challenging within the 60 days of signature as specified by the mining code.

*Source: IMF staff summary of chapter 20 on structural fiscal reforms.*

### 30. The authorities are taking action to exit the FATF’s grey list (MEFP ¶ 37). Building on the

### 1codea2023002 - 30. The authorities are taking action to exit the FATF’s grey list (MEFP ¶ 37). Building on the

### AML/CFT progress and FATF greylist exit
- Building on the new AML/CFT law in December 2022, the authorities need to implement the action plan agreed with the FATF.
- Recent progress:
  - Submitted the National Risk Assessment in May 2023.
  - Upcoming signature of a decree creating the taskforce supporting and monitoring the implementation of measures carried out by the CENAREF (National Financial Information Unit) with coordinated multi-partners’ technical support.
- Recommendation: Efforts to tackle FATF’s greylisting and to implement the new AML/CFT law should advance.

### Business climate and structural reforms
- Key constraints to the business climate:
  - Complex tax system, administrative hassle, lack of basic infrastructure and electricity, financing constraints, and an unreliable rule of law and judiciary.
- Ongoing reforms:
  - Liberalizing the telecommunications sector.
  - Revising the Investment Code and the Agricultural Law.
  - Implementing the financial inclusion strategy.
  - Efforts addressing climate change challenges, building adaptive infrastructure, and reinforcing the DRC’s role as a solution country for the global transition (Annex II).
- Recommendation: Support private sector growth by strengthening the rule of law, improving judicial efficiency, curbing corruption, increasing transparency in the mining sector and public finances, streamlining the tax system, and easing access to financial services.

### Program modalities, conditionality, and fiscal safeguards
- QPC modification:
  - Proposed lowering the end-June 2023 floor on changes in NIR from US$430 million to US$250 million to partly accommodate the April shortfall in FX tax revenues and limited capacity for FX intervention in 2023H1, without undermining the end-December 2023 reserve accumulation target.
- New program instruments:
  - New QPCs and ITs proposed for end-December 2023 and ITs for end-March 2024, with quarterly ITs in line with projections.
  - New IT on the ceiling of expenditure under emergency procedure as a share of domestically financed expenditure proposed at 10 percent for end-December 2023.
- New structural benchmarks (SBs) proposed:
  - (i) Signing the decree on procedures and public accounting (end-July 2023).
  - (ii) Signing a decree specifying that salary hikes must be agreed jointly by the ministers of Budget, Finance, and Public service (end-July 2023).
  - (iii) Completing the second phase of the non-tax revenue rationalization plan (end-September 2023).
  - (iv) Revising and expanding BCC regulations to comply with the new banking law (end-November 2023).
  - (v) Implementing a framework for the execution of Treasury and BCC operations, in accordance with the provisions of the law, with particular reference to Articles 23 and 24 (end-May 2024).
- Policy guidance:
  - Authorities will refrain from launching new public or parapublic financial institutions without adequate safeguards; any plans toward establishing a national development bank—or any new public or parapublic financial institution—should ensure adequate safeguards and a clear business plan while rationalizing existing public financial institutions.

### Financing assurances and external support
- ECF arrangement status:
  - The ECF arrangement is fully financed, with firm commitments for the next 12 months, good prospects of financing for the remainder of its duration (Table 7) and has helped catalyze resources.
- World Bank support:
  - The WB has approved on March 28 budget support operations of US$500 million (double the size of the operations in 2022), and subsequent operations are planned after the presidential election.
- External borrowing program (text table referenced): financing sources and uses outlined; infrastructure is a major use.

### Debt, arrears, and repayment capacity
- External arrears:
  - External official arrears to four non-Paris Club creditors amount to 0.1 percent of GDP; these pre-date HIPC Completion Point, are either in negotiation or under reconciliation, with progress advancing slowly.
  - Meetings with each of these creditors are scheduled in the next six months, with enhanced information sharing to reach an agreement.
  - Remaining external arrears are claims to commercial creditors, including some from Gécamines.
  - Authorities continue to make good faith efforts under the Lending into Arrears (LIA) policy, including sharing additional information and communication to facilitate resolution.
- IMF exposure and capacity to repay:
  - The IMF credit-to-GDP ratio will peak at 2.9 percent in 2024.
  - The IMF credit to GIR ratio is projected to peak at 34.1 percent in 2024.
  - Assessment: DRC’s capacity to repay the Fund remains adequate but subject to risks; higher-than-envisaged reserve accumulation, program implementation of envisioned reforms and the low public debt will help build resilience.

### Staff appraisal: macroeconomic outlook, risks, and policy recommendations
- Macroeconomic situation and risks:
  - Growth remains resilient, supported by mining activity.
  - Headline inflation increased in 2022 and is now well above the BCC’s target, driven by excess liquidity from significant public spending that put pressure on the exchange rate and inflation.
  - Large spending reallocation occurred in 2022.
  - Downside risks dominate: external uncertainty from geopolitical developments, trading-partner growth concerns, terms-of-trade shocks, escalating conflict in the East, and election-related spending pressures and potential delays in policy and reform actions.
- Program implementation:
  - All end-December 2022 quantitative performance criteria were met, and all indicative targets except two; all but one structural benchmark were also met.
  - Revenues disappointing so far in 2023, additional spending pressures, and elevated downside risks make implementing reforms more challenging.
- Monetary policy recommendations:
  - Tighter monetary policy is urgently needed to reduce inflation.
  - The BCC should increase the policy rate as needed, complemented by reserve requirements in domestic currency to reduce structural excess reserves.
  - Use BCC bills proactively to manage short-term liquidity fluctuations.
  - Tight policies should be sustained until the path of inflation is clearly converging to target; this will support de-dollarization and help build reserves.
- Fiscal policy recommendations:
  - Fiscal policy should help lower inflation and reduce pressures on the exchange rate, with close coordination with monetary policy, including on determining the FX needs of the Treasury.
  - A domestic fiscal balance of 0.5 percent of GDP in 2023 is appropriate to keep spending pressures under control, while preserving well-targeted capital and social spending.
  - Spending under emergency procedures needs to be brought under control; adherence to realistic investment plans and reforms to increase investment efficiency are essential.
  - Limiting cash payments, especially those in FX, will help complement BCC’s efforts to manage liquidity and build up reserves.
- Structural fiscal reforms:
  - Strengthen the expenditure chain and the functioning of the Treasury; reforms to enhance the budget to improve the quality, execution, and control of public spending.
  - Reform the price structure for fuel products to allow timelier rule-based adjustments in domestic prices to reduce untargeted fuel subsidies and generate fiscal space.
  - Advance revenue mobilization reforms, streamline non-tax revenues, and enhance tax administration to mobilize revenues sustainably and predictably.
- Central Bank reforms and financial sector:
  - The BCC should strengthen its independence, advance reforms to revamp its monetary policy framework and own safeguards, and bolster financial supervision.
  - Reinforcing the BCC’s governance, communications, independence, and financial position will enhance the margin of maneuver for monetary operations, which is challenged by undercapitalization and elevated dollarization.
  - Regulatory reforms required by the enactment of the new banking law would improve financial supervision, make the financial system more transparent and resilient, and help kickstart credit growth.

*International Monetary Fund — Democratic Republic of the Congo: staff report excerpts and program assessment*

### 44. Staff supports the authorities’ requests for modifying a QPC and completing the

### 44. Staff supports the authorities’ requests for modifying a QPC and completing the

### Staff assessment and program process
- Staff supports the authorities’ requests for modifying a QPC and completing the fourth review under the Extended Credit Facility arrangement and the financing assurances review.
- A strong commitment to tighten policies to curb inflation and steps to advance structural reforms, while building capacity, will support the authorities meet program objectives.

### Real sector: drivers and dynamics
- The extractive sector dominates growth dynamics, with growth benefitting from increasing copper and cobalt mining production.
- Non-extractive growth has decelerated lately due to services and manufacturing as investment moderated.
- Inflation and core inflation picked up recently due to passthrough effect of the exchange rate depreciation and inflationary pressures linked to fiscal spending.
- The exchange rate has been under depreciation pressure in this highly dollarized economy.

### External sector: composition and financing
- The current account deficit has widened due to higher imports of goods and services and has been financed largely by other investment flows followed by FDI.
- Exports remain highly concentrated in mining products (notably copper and cobalt); imports are broad-based across consumption, capital, energy, and intermediate goods.
- External debt remains subdued; reserves have recovered though remain below adequate levels.

### Fiscal sector: balances, revenue, and expenditures
- The fiscal deficit has remained wide as stronger revenue collection has not fully compensated for increases in current and exceptional expenditures, partly due to security spending related to the Eastern conflict.
- Revenue and grants are presented as 13.8 percent of GDP (2024, Table 3b).
- Expenditure is shown as 14.6 percent of GDP (2024, Table 3b).
- Overall fiscal balance (cash basis) is reported as -1.4 percent of GDP (2024, Table 3b).
- NCG is limited by the discontinuation of BCC advances since end-April 2020; the increase in NCG observed in late 2021 onward is driven by the part of the SDR allocation retroceded to the government as budgetary support.

### Monetary and financial sector
- Credit to the economy is increasing, albeit from a low base, with most credit allocated to private enterprises.
- Credit is extended almost entirely in FX; credit in Congolese francs (CDF) remains limited.
- Bank deposits are mostly in FX and have been stagnating.
- Capital ratios are stable; NPLs have risen moderately after the reinstatement of credit quality rules.

### Selected program and financial figures
- Extended Credit Facility (ECF) arrangement: Approved SDR152.3 million (on July 15, 2021).
- ECF review disbursements: SDR152.3 million disbursed on completion of the first, second, third, fourth, and fifth reviews; sixth and final review disbursement reported as SDR152.2 million (Table 8).
- Total SDR under the ECF arrangement: SDR1,066.0 million (100.0 quota percent) (Table 8).
- Gross official reserves (millions of U.S. dollars, Table 2): 2,948 (2021), 4,206 (2022), 4,497 (2023), 5,269, 5,895, 6,356, 7,242, 8,104, 8,911, 10,027 (projected series).
- Current account balance (in percent of GDP, memorandum, Table 2): -0.9 (2021), -1.0 (2022), -2.2 (2023), -5.3, -3.9, -5.5, -3.9, -2.8, -2.6, -2.4, -2.9 (2024–28 series).
- Revenue and grants (percent of GDP, Table 3b): 13.8 (2024), 13.6 (2025), 17.2 (2026), 16.6 (2027), 16.8 (2028).
- Expenditure (percent of GDP, Table 3b): 14.6 (2024), 15.2 (2025), 18.8 (2026), 17.1 (2027), 18.3 (2028).

### Policy priorities and recommendations
- Tighten macroeconomic policies to curb inflation and restore exchange rate stability.
- Advance structural reforms to broaden non-extractive growth, deepen financial intermediation in CDF, and reduce dollarization.
- Strengthen fiscal discipline by containing current and exceptional expenditures and improving revenue mobilization to narrow the fiscal deficit.
- Build institutional capacity and governance to implement program conditionality and improve debt and reserve management.

*Source: IMF staff report and supporting tables and figures as provided in the content unit.*

### Annex I. Risk Assessment Matrix

### Annex I. Risk Assessment Matrix

### Overview of the RAM framework
- The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff).
- Likelihood definitions (staff’s subjective assessment):
  - "low" = probability below 10 percent
  - "medium" = probability between 10 and 30 percent
  - "high" = probability between 30 and 50 percent
- The RAM distinguishes:
  - Conjunctural shocks and scenarios: risks that may materialize over a shorter horizon (between 12 to 18 months).
  - Structural risks: those likely to remain salient over a longer horizon.
- Non-mutually exclusive risks may interact and materialize jointly.

### Potential External Risks – Conjunctural Shocks
- Abrupt growth slowdown in China
  - Likelihood: Medium
  - Expected impact on economy: High
    - Lower exports and fiscal revenues would generate BOP and budget financing needs.
    - Lower commodity prices could reduce investment in the extractive sector and dampen DRC’s growth prospects.
    - Lower fiscal revenues would put at risk priority spending, exacerbate poverty and inequality, derail government’s investment plans and lower growth prospects.
  - Policy response:
    - Maintain prudent macro policies to foster macro stability.
    - Allow the exchange rate to act as a shock absorber and use external buffers to prevent disorderly depreciation that could negatively impact financial stability.
    - Step up revenue mobilization efforts, limit nonpriority spending to create space for fiscal policy support.
    - Mobilize external financing support.
    - Promote economic diversification in exported goods as well as exports’ markets destinations.

- Intensification of regional conflict(s)
  - Likelihood: High
  - Expected impact on economy: High
    - Escalation of Russia’s war in Ukraine or other regional conflicts and resulting economic sanctions disrupt trade (e.g., energy, food, tourism, and/or critical supply chain components), remittances, refugee flows, FDI and financial flows, and payment systems.
    - Supply disruptions and sharper-than-anticipated increases in international energy prices raise the costs of energy imports and other imported goods.
  - Policy response:
    - Develop a contingency plan that would lower the impact of a delayed economic recovery.

- Commodity price volatility
  - Likelihood: Medium
  - Expected impact on economy: High
    - Higher volatility in commodity prices will challenge sustainable macro policies and put pressure on the domestic currency, reserves, and fiscal revenues.
  - Policy response:
    - Accumulate international reserve buffers.
    - Diversify the structure of the economy and export sources.
    - Increase participation in regional trade area agreements (EAC and AFCFTA).
    - Use exchange rate flexibility as a shock absorber but intervene to prevent disorderly currency movements.

### DRC-Specific Risks
- Escalated armed conflicts in the East
  - Likelihood: High
  - Expected impact on economy: High
    - Economic activity would be hurt though mostly in areas not well integrated with the rest of the country.
    - Increase fiscal and external imbalances.
  - Policy response:
    - Make room for a budgetary contingency for national security emergency.
    - Provide humanitarian assistance to people hit by the conflict.

- Political instability and widespread social discontent ahead of the Presidential elections
  - Likelihood: Medium
  - Expected impact on economy: High
    - Policymaking and macro stability could be undermined as well as the ability to advance with ambitious and much needed structural reforms.
    - Social tensions could undermine the ability to advance with ambitious and much needed structural reforms and threaten (limited) external financing flows from international financial institutions.
  - Policy response:
    - Maintain commitment and ownership of reforms to build strong institutions; step up governance reforms.
    - Anchor inflationary expectations by tightening monetary policy.
    - Increase spending on social protection to the poorest segments.
    - Identify external financing sources, while remaining prudent on sovereign indebtedness.

- Extreme climate events
  - Likelihood: Medium
  - Expected impact on economy: Medium
    - Risks related to floods and landslides natural disasters could trigger further public expenditures and alter the planned reduction of public debt.
  - Policy response:
    - Prioritize projects related to climate change.
    - Build infrastructure resilient to natural disaster.

*Italicized attribution: Annex I. Risk Assessment Matrix (content unit).*

### Annex II. Climate Change Risks, Opportunities, and Authorities’ Strategy

### Vulnerability to climate change — key findings
- Poverty and fragility
  - About 77 percent of the population (75 million) live in extreme poverty (14 percent of the SSA total).
  - Over half the population lives in rural areas, but the rate of urban poverty is elevated (at 51 percent in Kinshasa).
  - Ineffective land management has pushed the urban poor into unsuitable settlements, increasing vulnerability to climate shocks.

- Natural disasters and health risks
  - DRC is particularly prone to floods and landslides.
  - Climate change is projected to increase both the likelihood and the intensity of extreme precipitation events and floods; temperatures will continue rising through the end of the century.
  - Recurrent epidemics including malaria, cholera, and other diarrheal and vector-borne diseases would proliferate with increased flooding.

- Poor infrastructure amplifies impacts
  - Infrastructure deficit limits competitiveness and constrains economic diversification; no road connects Eastern and Western DRC.
  - Road statistics: 5 percent of roads are paved, 14 percent in good condition.
  - Access to services:
    - 19 percent of the population has access to electricity, and 4 percent to clean cooking.
    - 34 percent of households have access to water (19 percent in rural areas) and 29 percent has access to sanitation.
  - Biomass accounts for 98.8 percent of the country’s household total energy consumption.
  - Recurring floods degrade infrastructure and land and exacerbate chronic food insecurity; transportation disruptions rapidly impact retail food prices and imperil agriculture.
  - Extreme climatic events would degrade and destroy health, education, and sanitation infrastructure, compromising limited access to basic public services.

- Fiscal and macroeconomic losses
  - The cost of disruption due to natural shocks to the power sector is estimated at 1.9 percent of GDP in 2019.
  - Under an optimistic scenario, climate change could reduce DRC’s GDP by 6.5 percent by 2030 and push over an additional 3.5 million people into poverty.

### Opportunities and DRC’s potential in the global transition
- Carbon sequestration and global public good
  - The Congo Basin’s forest absorbs as much as 4 percent of global emissions every year.
  - DRC’s peatlands entrap 19 billion tons of carbon.
  - In total, DRC holds about 42 billion tons of “irrecoverable” carbon (120 percent of global annual emissions).

- Green minerals and energy transition
  - DRC is the largest cobalt producer worldwide (with about 60 percent of the global cobalt reserves) and the top copper producer in Africa.
  - Efforts to expand copper and lithium production could make the DRC a top global supplier.
  - If exploited sustainably, green minerals could create opportunities for economic growth, green technology adoption, job creation, and resources for climate-resilient infrastructure.

- Renewable energy potential and water resources
  - DRC’s hydroelectric potential could power large parts of the region with renewable energy, notably along the Congo River.
  - The Congo Basin carries about 10 percent of the world's fresh water (52 percent of Africa’s).

### Finding the right balance: oil and gas exploration concerns
- Recent licensing auctions
  - The DRC launched licensing auctions for 27 oil blocks and 3 gas blocks at end-July 2022.
  - The DRC holds an estimated 22 billion barrels of oil and 66 billion cubic meters of gas.
  - Nine of the proposed blocks overlap with protected areas, including a national park, nature reserves, peatlands, and a mangroves marine park.
  - The auction raised concerns about a forest protection deal signed with the Central African Forest Initiative (CAFI).
  - The auctioning of the 27 oil blocks have been delayed; the government has auctioned off three gas blocks to U.S. and Canadian companies. Three of the remaining oil blocks are particularly controversial because they are placed in parts of the Cuvette Centrale rainforest and peatlands.
  - The government pushed back bidding which has been postponed to deadlines in July and August 2023.
  - Authorities are considering bidding oil blocks for conservation projects instead of drilling; a U.S. firm reportedly estimated a conservation project could generate at least US$6 billion, create more jobs than oil exploration, and produce higher tax revenue for the DRC government.

- Policy advice to limit reputational and environmental risks
  - Ensure that any exploration permit is allocated in accordance with the legal framework.
  - Publish all social and environmental impact assessment reports ahead of project implementation.
  - Consider alternative options to bidding blocks for drilling, including for conservation, or policies such as feebates for forests and payments for environmental services.

### Authorities’ climate change strategy and mitigation actions
- National plans and commitments
  - The authorities’ National Adaptation Plan to Climate Change (NAP) spans reforms covering adaptation (water resources, forestry, agriculture), mitigation, and transition.
  - The NAP is complemented by the climate diagnostics provided by the C-PIMA and the forthcoming CCDR (pending publication).
  - Since 2009 DRC has been involved in REDD+; in 2015 DRC presented its REDD+ Readiness-Package and pledged to reduce GHG emissions by 17 percent.
  - In 2021 DRC updated its Nationally Determined Contribution (NDC) pledging to cut emissions to 21 percent by 2030.
  - Ninety climate activities are identified in the new NDC, grouped in sectors such as energy, agriculture, forest and land use, waste management, water management, health, and coastal erosion.

- Emissions profile
  - Land-use change driven by agriculture and forestry: 86 percent of GHG emissions.
  - Waste: 11 percent.
  - Agriculture: 1.0 percent.
  - Energy: 0.6 percent.
  - 2019 per capita GHG emissions: 0.63 tCO2e.
  - 2019 per-capita carbon emissions: 0.04 metric tons (world average 4.5; SSA average 0.8).

- Nature-based mitigation emphasis
  - Mitigation strategy anchored on nature-based solutions to maximize ecosystem service improvements.
  - Plans to reduce emissions from land use and forestry, improve forest management, reforest about three million hectares over the next five years, and maintain forest cover at 63.5 percent of the territory by 2030.

### Priority actions in the National Adaptation Plan (NAP)
- Conservation of forest ecosystems and biodiversity: adapt forest management to climate change to ensure energy supply and livelihoods.
- Integrated agriculture, fishing, livestock farming and rural development: select resilient varieties at agricultural research centers and implement smart agriculture to strengthen resilience.
- Water, sanitation, and disaster risk management: modify water resource management and improve prevention of extreme weather events and floods through early warning systems.
- Action plan and associated costs: evaluate the cost of implementing priority climate adaptation measures and develop public-private partnerships to formulate and implement adaptation policies.
- Private sector engagement: increase the role of the private sector through corporate social responsibility to help promulgate and finance policies emerging from the NAP.

*Italicized attribution: Annex II. Climate Change Risks, Opportunities, and Authorities’ Strategy (content unit).*

### 14.   Achieving the NDC will require sizable financing. The financing needs to achieve this

### 14.   Achieving the NDC will require sizable financing. The financing needs to achieve this

### Financing needs to achieve the NDC
- Total financing needs for the updated NDC are estimated at US$48 billion (87.5 percent of GDP in 2021) during 2022-30.
- The US$48 billion is split between mitigation (US$25 billion) and adaption (US$23 billion).
- In the updated NDC, 19 percent of emissions reduction is conditional on external financing and 2 percent will be financed on domestic resources.

### Current climate finance commitments and private participation
- Current commitments for climate financing have fallen short of financing requirements.
- The DRC accounts for less than 2 percent of the global climate finance flows to Africa.
- Public institutions (multilateral climate funds, multilateral and bilateral development finance institutions (DFI) and governments) have provided climate finance in the form of:
  - grants: 50 percent of financing portfolio;
  - project level market debt: 10 percent of financing portfolio;
  - low-cost project debt: 40 percent of financing portfolio.
- These public and official sources account for 98 percent of climate finance flows to the DRC.
- Private institutions represent only 2 percent of climate finance flows to the DRC.
- Actual and perceived risk can dissuade private capital players.

### Priority measures to expand private climate finance markets
- Enhance governance and institutional frameworks, including:
  - (i) the accreditation of national entities under various financing mechanisms;
  - (ii) the buildup of institutional and technical capacity to develop bankable climate-related project proposals;
  - (iii) the need to establish robust monitoring, reporting and verification (MRV) systems for climate-related outcomes.

### Public investment management (PIM) practices and climate commitments
- The DRC’s commitments in the fight against climate change are only just starting to feed into PIM practices.
- Good practices becoming operational include:
  - the coordinating role of the Ministry of Environment and Sustainable Development for investment decisions;
  - the emergence of an institutional and financial framework for natural disaster risk management;
  - the legal obligation of conducting environmental and social impact assessments.
- Additional needs:
  - aligning and recognizing climate consideration in the national and sectoral strategies;
  - putting in place a legal framework and strategy for land management;
  - methodologies to assess climate risks and impact on infrastructure.

### Annex II. Box 2 — DIGNAD simulations: benefits of ex-ante adaptation investment
- Model: Debt, Investment, Growth, and Natural Disasters (DIGNAD), calibrated to the DRC, simulates a hypothetical disaster lowering GDP by about 6.5 percent (mimicking the optimistic climate risk scenario for the DRC).
- GDP decline arises mainly from damages to infrastructure and negative impact on private and public capital.
- Scenarios:
  - Scenario 1: No policy change — invest in standard capital infrastructure in years 1–5; a natural disaster occurs in year 6.
  - Scenario 2: Adaptation investment — additional investment in adaptation infrastructure of 4 percent of GDP relative to the no additional investment scenario in years 1–5; adaptation investment financed through concessional public borrowing.
  - Scenario 3: Adaptation investment along with PIM reforms — additional public investment in adaptation infrastructure as in Scenario 2 and improved public investment management (PIM) efficiency. Current public investment efficiency in the DRC is 12 percent; improved efficiency by 20 percent reaching 32 percent.
- Simulation outcomes:
  - Investing an additional 4 percent of GDP in adaptation capital for the next five years would save the DRC about 2.5 percent of GDP in output losses relative to Scenario 1 when disaster hits.
  - Improved PIM and efficiency (Scenario 3) could further lessen the growth impact of natural disaster with an additional saving of 1.1 percent GDP in output loss.
  - Public debt would be expected to stabilize below 30 percent of GDP with adaptive infrastructure investment (Scenarios 2 and 3).
- Note: Simulation assumptions include a single one-time climate hazard event, abstracting from recurring climate shocks or slow-moving climate changes.

### Annex II. Box 3 — Main C-PIMA recommendations (reform axes and measures)
- Strengthening climate-aware planning (high priority):
  - Align the PNSD (National Development Strategy Plan) and sectoral strategies with the NCD's climate objectives to provide sectoral breakdown of climate-related objectives, targets and outcomes.
  - Issue legislation on land management incorporating climate risks; reflect this in land management strategy and a land use strategy.
  - Create a dedicated unit to support preparation and costing of climate-aware investment strategies by sectoral ministries.
- Coordinating on climate-related public investment decision-making across the public sector (medium priority):
  - Make public corporations required to make their climate-related investments compliant with national climate policies.
  - Incorporate climate change in the framework for consultation between the central government and the provinces.
- Enhancing project appraisal and selection by incorporating climate-related analysis and criteria:
  - Incorporate climate change in the legal framework on environmental assessments.
  - Establish a standard methodology for environmental assessments.
  - Incorporate climate change challenges in the PPP legal framework.
  - Explicitly include factors linked to climate in government decision-making criteria for investment projects.
- Budgeting and portfolio management (weak priority):
  - Incorporate public investment spending relating to climate change in the budget.
  - Establish an explicit legal basis for ex-post reviews or audits on outcomes of investment projects in terms of climate change mitigation and adaptation.
  - Revamp asset management and maintenance policies to incorporate climate risks.
  - Set up a tagging system for climate-related investment spending over the medium term, requiring nomenclature and information systems preparation.
- Improving risk management (low priority):
  - Adopt the national natural disaster risk management strategy that incorporates specific risks to infrastructure from climate change (data on location of the risk, exposure of assets or emergency procurement procedures).
  - Consolidate financing mechanisms to deal with the costs of climate-related damage to public infrastructure in the budget.
  - Incorporate climate change-related risks in the fiscal risk statement.
- Sector note:
  - The reduction of deforestation and forest degradation (REDD+) strategy and its investment plan (PIREDD) consistently integrate action details (draft, preliminary budget, and impact indicators) and the DRC’s commitments on sustainable forest management.
  - BCECO prepared a draft environmental and social procedures manual (to be validated), whose status needs to be confirmed.

*Source: Democratic Republic of the Congo — IMF country report excerpts (sections on NDC financing, climate finance landscape, DIGNAD simulations, and C-PIMA recommendations).*

### 2.2 percent of GDP). Combined with stagnating deposits, this increase in credit led to a 23 percent

### 1codea2023002 - 2.2 percent of GDP). Combined with stagnating deposits, this increase in credit led to a 23 percent

### Short-term outlook and downside risks
- Projected real GDP growth in 2023: 6.8 percent.
- Mining sector growth in 2023: 11.7 percent.
- Non-mining sector growth in 2023: 4.4 percent (could reach).
- Inflation: expected to be brought down gradually in the second half of 2023 by coordinated tightening of fiscal and monetary policies.
- Current account risks: worse-than-projected terms of trade could widen the current account deficit to around 5.5 percent of GDP.
- Key downside risks identified:
  - Repercussions of the ongoing war in Ukraine.
  - Global growth uncertainties, particularly growth in China.
  - Risks to the international financial system affecting demand and prices for mining products.
  - Domestic risks if conflict in the East does not de-escalate, including additional fiscal pressures related to elections and humanitarian needs.
- Program stance: Prepared to adjust economic policies under the IMF-supported program and ongoing dialogue if necessary.

### Medium-term outlook and growth drivers
- Projected average growth between 2024 and 2028: at least 5.2 percent annually.
- Projected narrowing of current account deficit to 2.4 percent of GDP by 2027.
- Growth drivers and policy priorities:
  - Continued development of mining.
  - Structural reforms to stimulate non-mining sector growth through economic diversification.
  - Reforms aimed at mobilizing foreign direct investment, improving public investment management and its monitoring and evaluation, increasing competitiveness, and strengthening resilience to external shocks.
- Social and human capital measures to support diversification:
  - Improve education and health systems.
  - Improve business environment and governance.
  - Develop basic infrastructure: transport and communications, energy, and access to safe drinking water.

### Banking sector and credit dynamics (selected excerpt)
- Increase in credit combined with stagnating deposits led to a 23 percent decline in the net foreign assets of the banks.
- Following reinstatement of credit quality rules in December 2021, non-performing loans increased moderately; data likely to be revised after resumption of on-site inspections in 2023.
- Deposit movements note: Approximately CDF425 billion of the decline in deposits in December was due to the transfer to commercial banks of a portion of the SDR allocation for the PDL-145T project. In January, US$140 million were drawn by the government, reconstituting government deposits at the BCC of around CDF284 billion, the counterpart in foreign currency being transferred to the official reserves. An additional US$30 million were drawn in April.

### 2022–23 Fiscal policy: outcomes and 2023 stance
- 2022 domestic fiscal deficit: estimated at 1.2 percent of GDP (CDF1,620 billion).
- Exceptional expenditure in 2022: 2.4 percent of GDP.
- Revenues increase in 2022: tax and nontax revenues totaled CDF18,928 billion (substantially higher than the indicative target of CDF14,500 billion).
- Drivers of the sharp increase in current expenditure in Q4 2022:
  - Security spending: 1.5 percent of GDP.
  - Clearance of domestic arrears: 1.2 percent of GDP.
  - Election spending.
- Spending under emergency procedures increased by 30 percent between the third and fourth quarters of 2022.
- QPC/IT performance:
  - Quantitative performance criterion on the domestic fiscal balance at end-2022 was met.
  - All indicative targets on fiscal operations met except the target for social spending.
  - Payments to GAVI were made on time; other health program disbursements were behind schedule.
- 2023 fiscal policy tightening to contain inflationary pressures while responding to security and humanitarian needs:
  - End-December 2023 revenue target (IT): CDF20,199 billion.
  - Oil subsidy allocation in 2023: CDF596 billion (payments corresponding to certified shortfalls of US$171 million for the last two quarters of 2022 and estimated shortfalls of US$90 million for the first three quarters in 2023).
  - Additional exceptional spending projected in 2023: CDF3,037 billion, including humanitarian expenditure of CDF416 billion; partially offset by lower current spending by ministries/institutions of around CDF400 billion.
  - Commitment to limit the wage bill to CDF7130 billion (end-December 2023 IT) and the workforce to 1,499,110 employees.
    - Freeze number of civil servants under the general system at 277,224 civil servants and limit their remuneration package to approximately CDF1,281 billion in 2023.
    - Recruit 2500 magistrates and promote priority sectors (defense and security, education and health).
  - Plan to clear one envelope of arrears totaling CDF1,665 billion (includes arrears to oil companies and domestic debt clearance strategy).
  - Domestically financed public investment spending projection for 2023: reduced to CDF2,141 billion (accounting for transfers to BCECO and CFEF in 2022 not yet executed and start on execution of remaining half of general allocation of SDRs not disbursed in 2022 — approximately US$203 million).
  - Forecasted domestic fiscal deficit for 2023 (end-December 2023 QPC): CDF831 billion.

### Fiscal policy principles and debt/financing limits
- Limit spending under emergency procedures to 10 percent of total spending from own resources (proposed end-December 2023 IT) and to 8 percent by end-December 2024; cash payments to be strictly monitored.
- Refrain from any direct monetary financing of deficits (in accordance with the Organic Law on the BCC and the Stability Pact since August 2022).
- Maintain a moderate risk of debt distress to preserve access to concessional external financing.
- Ceilings on present value of new public sector loans:
  - US$1.5 billion (end-June 2023 QPC).
  - US$2 billion (end-December 2023 QPC).
- Revenue overperformance adjustor: maintain adjustor for domestic fiscal balance equivalent to 80 percent of revenue overperformance (TMU ¶20).

### Structural fiscal reforms — revenue mobilization and administration
- Revenue mobilization progress: total tax and nontax revenues increased from 8.7 percent of GDP in 2020 to 15.9 percent of GDP in 2022; goal to converge to around 17 percent of GDP (sub-Saharan African peers average).
- Key measures to expand the tax base and improve compliance:
  - Reform exceptional tax regimes and conventions allowing tax exemptions, except those set out in prevailing administrative codes.
  - Facilitate taxpayer registration and increase number of large, medium-sized, and small taxpayers.
  - Accelerate digitalization:
    - Implement and deploy integrated tax management software (ERP) in the General Directorate of Taxes (DGI).
    - Biometric registration of taxpayers (individuals and legal entities).
    - Expand remote filing with Tax Centers (already mandatory for large taxpayers).
  - Secure the taxpayer registry by limiting access for customs operations, public procurement, and the right to issue VAT invoices to active taxpayers identified by DGI.
  - Increase coverage of risks via an adapted audit plan and increase collection of tax arrears.
- VAT system and arrears:
  - Self-liquidating VAT system applies to mining companies in the operational phase and not to specific products.
  - Stock of certified VAT arrears to mining companies estimated at some US$800 million (IGF audit March 2022); refunds issued in 2022: CDF228 billion.
  - Domestic VAT arrears at end-2022: CDF1096 billion (0.7 percent of GDP).
  - Plan to repay approximately CDF380 billion in VAT arrears in 2023; remaining refunds to be repaid over several years according to fiscal space.
  - Administrative measures: decree governing regulation of standardized invoicing signed March 3, 2023; government will sign implementing regulations by July 2023 and procure an IT solution for audits by December 30, 2023 to issue certification codes per invoice.
  - Commitment to no longer grant VAT exemptions except in exceptional circumstances.
- General Directorate of Customs and Excise (DGDA) reforms:
  - Continued modernization, training in ASYCUDA World (covers more than 98 percent of customs revenues).
  - Enhanced controls on declared value and administrative monitoring of exemptions/conditional relief.
  - Equipment/software provided to five key border posts (Kasumbalesa, Petite Barrière-Goma, Kasindi, Mahagi and Sakania).
  - Digitalization with GELEC, SYSTAD and BADA; goal to expand deployment to 10 new customs posts in 2023 for a total of 89 out of 108.
  - Interconnection work with customs administrations of the Republic of Congo, Kenya, Angola, Uganda, Tanzania and Zambia.
  - Excise traceability system (STDA) implemented for tobacco and telecommunications in 2022; installation at beverage producers accelerated in early 2023.
  - Excise duties currently represent 0.6 percent of GDP (average for Africa: 1.6 percent); planned excise tax rate increases on tobacco, alcohol and cars could generate additional revenues of around CDF200 billion (0.1 percent of GDP).
- General Directorate of Administrative, Property, Judicial and Investment Revenues (DGRAD) improvements:
  - Computerization of revenue collection ongoing with partner support; LOGIRAD deployed in six main revenue-producing units; expansion planned into high-potential provinces.
  - Strengthening legal/institutional framework: complete decree on DGRAD operation; adapt administrative regulation on DGRAD career personnel; align interministerial orders with new nomenclature/procedural regulations.
  - Improve nontax revenue collection from Congolese National Police and justice sector; issuance of passports, biometric driver’s licenses, work permits; revenue from DRC embassies and consulates.
  - Streamline non-tax charges per plan finalized in October 2022; complete second phase with sectoral ministries agreeing on final list and rates (proposed end-September 2023 SB).
  - Inventory of parafiscal charges, special accounts and annexed budgets to be finalized by mid-2023 (end-June 2023 SB) to begin streamlining.

### Controlling expenditure, fiscal risks, and arrears clearance
- Fiscal risk management:
  - Detailed statement annexed to Budget Law prepared with IMF technical assistance covering macroeconomic risks, public debt risks, risks related to public entities, financial sector risks, institutional risks, and long-term risks (including climate change).
- Public debt and fiscal risk commitments:
  - Avoid accumulation of arrears on external public debt service (QPC).
  - Avoid accumulation of government wage arrears (IT).
  - Avoid recourse to central bank loans to the central government (QPC).
  - No longer use central bank deposits as collateral/guarantees for central government borrowing; repay existing loans per timetable (IT).
- Domestic arrears clearance strategy:
  - Independent audit of stock of certified domestic arrears completed in December 2022 (end-December 2022 SB).
  - Strategy presented to Council of Ministers on May 19, 2023:
    - Payment by bank transfer and without haircut of claims less than US$300,000.
    - Other claims converted into Treasury bills to be repaid annually before maturity through buyback operations.
    - Clearance limited to claims certified and validated through the strategy (estimated at US$1.166 billion at end-April 2023).
    - Abstain from signing memoranda of understanding on payment of arrears and from executing payments on unvalidated arrears.
    - Launch communications campaign and online application to allow creditors to track their files.

*Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1codea2023002.pdf*

### 20. We remain determined to reform the fuel price subsidy system to manage the risk

### 20. We remain determined to reform the fuel price subsidy system to manage the risk associated with liabilities to oil distributors

### Fuel subsidy liabilities and recent payments
- Gradual pump price increases since late 2021 totaled between 25 percent and 87 percent depending on region and product.
- Elimination of the subsidy on fuel purchases by airlines for international flights since end-May 2022.
- Clearance and payments:
  - Clearance of US$336 million in oil subsidy arrears.
  - Payment of US$98 million for the 2022 oil subsidy.
- Stock of arrears to distributors:
  - US$492 million at end-2022 (including US$43.4 million for 2021 and US$448.1 million for 2022).
  - US$475 million at end-March 2023 following a US$17 million payment in January 2023.
- Projection: shortfalls of about US$14 million per month on average in 2023, given current gap between pump prices and market-cost-reflective prices.

### Improvements to loss calculation, certification, and transparency
- Draft decree prepared to establish eligibility criteria and methods for calculating losses and shortfalls in the oil industry; targeted for publication by end of 2023.
- Audit of price structure by an international consulting firm: final report submitted to the government in early-May 2023; recommends improvements to the price structure.
  - Commitment to develop a plan to implement audit recommendations by August 2023 through the Audit Follow-up Committee.
- From June 2023 the government will begin monthly publication of:
  - The price structure,
  - The difference between pump prices and market prices,
  - The estimated amount of subsidy to cover distributor shortfalls,
  - Tax revenue shortfalls.
- Distributor shortfalls for a given quarter will be certified within a maximum of two months.

### Targeting and subsidy phasing
- Intention to improve targeting by phasing out the subsidy to mining companies as of June 2023.
  - Decree issued to remove mining companies from the diesel subsidy for the southern supply zone.
  - Ongoing technical discussions between the Ministry of Hydrocarbons and the oil industry to define application conditions.

### Price policy and social mitigation
- Prepared to pursue gradual pump price adjustments to reduce formation of new liabilities while avoiding undue effects on purchasing power.
- Plan to eventually introduce targeted transfers to compensate households most vulnerable to price volatility.
- Requested technical assistance from the IMF’s Public Finance Department to support the reform.

---

### 21. Wage bill control and civil service reform

### Recent developments and projections
- Wage bill increased by 20 percent in 2022 due to increases in base salary for some civil servants and bonuses in health, education, and security sectors.
- Projected wage bill of CDF7,130 billion in 2023 (an 8.6 percent increase over 2022) to improve base salary for various targeted professions.

### Policy measures to contain wage pressures
- Inter-ministerial order to require joint approval by Ministers of Budget, Finance and Civil Service for any salary increase (proposed end-July 2023 SB).
- Medium-term civil service reform to include:
  - Overall wage policy strategy.
  - Cleanup of the civil service staff database based on biometric identification to eliminate ghost employees.
  - Reorganization of social security coverage of public officials.
  - A financially sustainable pension program.

---

### 22. Increasing social spending and humanitarian response

### Commitments and targets
- Maintain emergency measures to achieve the program indicative target on government spending for the three health programs in 2023 and reach the December 2023 IO of CDF75 billion.

### Humanitarian and social priorities
- Increased humanitarian spending in response to conflict escalation in the East, which has added hundreds of thousands of displaced persons to the existing 6 million displaced persons.
- Humanitarian spending focuses on:
  - Developing shelters after natural disasters,
  - Providing food and drinking water,
  - Hygienic and sanitation conditions,
  - Emergency relief and health response,
  - Civil protection of internally displaced persons,
  - Protecting unaccompanied children and facilitating access to education.
- Broader social priorities:
  - Free access to education,
  - Reduction of regional inequalities,
  - Acceleration of food security projects under the Agricultural Transformation Agenda.
- Support to Ministry of Social Affairs and the National Promotion and Social Service Fund (FNPSS) to finalize the national social protection policy and strategy (PSNPS).

---

### 23. Improving public investment management

### PIMA-based reforms and roadmap
- Reforms follow IMF PIMA recommendations from March and September 2022 identifying structural weaknesses across the public investment cycle.
- Roadmap for strengthening investment management to be adopted by the Council of Ministers; adoption could occur by end of July 2023.

### Actions initiated
- Restructuring of the Project and Program Monitoring Unit (CSPP):
  - New coordination team and redefined missions, expansion to monitor projects from multiple development partners.
  - Competitive recruitment of CSPP staff to be completed by end of June 2023.
- Enhanced monitoring using a dashboard and proactive delay management.
- Evaluation of performance contracts (signed in 2022) between government and PMU coordinators (representing more than 70 percent of the portfolio of externally financed projects) and preparation of 2023 performance contracts.

### Legal, procedural, and operational measures
- Decree on public investment management covering all project-cycle phases signed on May 31, 2023 (end-May 2023 SB).
- Unique digital identifier to be assigned to each government- or partner-financed project.
- Procedures manual to standardize public investment management methodologies, including assessment of climate impacts, to be adopted by end-2023 (end-December 2023 SB).
- Order (“arrété”) modifying CSPP organization and operation signed in May 2023.
- Standardization of information flows on physical and financial execution among PMUs, fiduciary agencies, and monitoring entities.
- Preparation of a comprehensive and realistic public investment program to support transparent project selection and inform Parliament.

### PDL-145T implementation and SDR allocation
- Local Development Program for 145 Territories (PDL-145T):
  - Partly financed by the general SDR allocation of August 2021.
  - US$511 million in 2022 for schools, health centers and administrative buildings.
  - US$203 million planned for 2023 for rural electrification.
  - Low implementation rate by end-2022: about 20 percent of the US$511 million made available to implementing agencies was spent.
  - Expectation of accelerated implementation in 2023 as works progress and infrastructures delivered.
  - Remaining US$203 million to be made available in 2023 for the second component (rural electrification).
  - Monitoring: detailed project sheets and geo-location for each infrastructure; quarterly reports by implementing agencies within one month of quarter end; consolidated annual report on SDR allocation use in 2022 to be published by end-June 2023.

### BCeCo strengthening
- Steering committee headed by Ministry of Finance representative oversees BCeCo.
- Audits (2017–2021) indicate need to improve project structuring and internal processes (archiving, reporting, monitoring of provisional vouchers, accounting).
- Action plan under Ministry of Finance supervision; annual publication of independent external audits including auditors’ comments to begin.

---

### 24. Improving Public Financial Management (PFM)

### Operational action plan priorities (adopted August 19, 2022)
- Budget reform and credibility:
  - Improve inter-institutional coordination, macroeconomic framework preparation, and fiscal resource projection (including mining).
  - Draft Law on budget execution for 2022 to be sent by end-July 2023 to Parliament and the Audit Court; to be examined at the September 2023 budget session.
  - Publish Cash Flow Plan as executed in 2022 on the Ministry of Finance website in June 2023 and undertake to publish quarterly henceforth.
  - Migration to program budgeting:
    - Complete pilot phase decentralizing payment order process in four pilot ministries.
    - Adoption of budget and programming template by government for improved presentation.
  - Intergovernmental financial relations: regulations establishing distribution mechanisms for transfers and national revenues signed in May 2023.

- Tax policy and strengthening tax administrations (see ¶15-16).

- Public expenditure reform:
  - Limit recourse to emergency procedures:
    - Expenditures under emergency procedure: about 8 percent in 2021; 13.3 percent in 2022.
    - Proposal to cap such spending at 10 percent of spending on own resources in 2023 (end-December 2023 IT).
    - Reactivated Committee for the Regularization of Spending under Emergency Procedures in May 2023.
    - Decree on procedures and accounting of public expenditures (including eligibility under emergency procedures) proposed end-July 2023 SB.
  - Strengthen expenditure reconciliation procedures:
    - Expenditure Reconciliation Commission has met weekly since May 2023 to improve classification in the budget execution report.
  - Improve transparency and efficiency of public procurement:
    - New decree on public procurement procedures adopted and published in the Official Gazette on March 7, 2023.
    - Decree includes provisions to improve identification and dissemination of beneficial ownership information.
    - Digitalization via SIGMAP launched August 29, 2022; SIGMAP deployment roadmap transmitted in early May 2023 with expected adoption by end of June 2023.
  - Strengthen public debt management:
    - Interministerial decree of December 5, 2020 instructs DGDP to evaluate and monitor new debt contracts and ensure public enterprise debt declaration is respected.
    - Draft law on public debt to harmonize legal framework being finalized.
  - Improve supervision of public enterprises (EPs) and risk management:
    - Main EPs required to produce financial statements regularly.
    - Government, with IMF technical assistance, to produce a consolidated report on EP financial positions to be published on the Ministry of the Portfolio’s website.

- Public accounting and cash flow management:
  - Restoration of government accounting function:
    - Decree creating General Directorate of the Treasury and Public Accounting (DGTCP) signed March 2022; framework and organizational structure decree signed December 2022.
    - Key position appointments completed in February 2023 via competitive recruitment.
    - Order organizing national network of government accounting officers signed March 2023.
    - Decrees on public revenue and expenditure accounting procedures initially planned for October 2023 could be signed by end of 2023.
  - Improve cash management:
    - Cash Flow Plan Commission reactivated in May 2023 to discuss weekly revenue and expenditure cash flows.
  - Introduction of the Single Treasury Account (STA):
    - Inventory of government accounts at the central bank completed.
    - Phase covering accounts at commercial banks delayed; on-site missions to be carried out in July 2023 per agreed timetable.
    - IMF technical assistance in April 2023 led to drafting the decree defining STA scope and operating procedures.
    - Decree defining the STA scope and structure signed on May 31, 2023 (end-May 2023 SB).
  - Reduction of cash payments:
    - Under the anti-money laundering and terrorist financing law of December 27, 2022, framework for Treasury operations to be established.
    - Ensure public institutions have bank accounts by end-September 2023 to enable payment by bank transfer.

- Digitalization of the public finance management system:
  - Adopt overall plan for digitalizing the PFM system by end-June 2023.
  - Establish institutional framework via decree creating the General Directorate of Financial Information Systems to plan and coordinate PFM IT systems, assist PFM project contracting, and ensure security, integrity, reliability, and technical regulation of public finance information systems.

*Source: IMF staff report excerpt (chapter/section 20–24).*

### 25. We will explore overhauling the fiscal framework to anchor fiscal policy in a medium-

### 1codea2023002 - 25. We will explore overhauling the fiscal framework to anchor fiscal policy in a medium-

### Fiscal framework and mining revenues
- Explore overhauling the fiscal framework to anchor fiscal policy in a medium-term balance that excludes mining resources.
- Significant progress in mobilization of mining revenues via the 2018 Mining Code and revenue mobilization efforts.
- IMF Fiscal Affairs Department technical assistance requested to design a fiscal framework to manage volatility from mining prices.
- Interim action: improve budget statistics to correctly identify and capture mining revenues.
- Objective: enable less cyclical fiscal policies that account for volatility, uncertainty, and management of fiscal risks.

### Improving finance and public debt statistics
- Make the new restricted accounting approach operational, using the General Balance of Treasury Accounts (BGCT) as the main source for the TOFE based on the 2014 GFSM format.
- DGTCP to prepare and regularly publish the TOFE in the GFSM format (building on the 1986 GFSM TOFEs).
- DGDP plans to reinstate regular quarterly publication of public sector debt statistics in accordance with the 2013 Guide for Compilers and Users.
- Publication timeline: these statistics will be published in the Quarterly Public Sector Debt Statistics (QPSDS) database starting in the second quarter of 2023.

### Monetary policy stance and instruments (tightening through end-2023)
- The BCC will tighten monetary policy to address inflationary pressures and limit surplus liquidity.
- Actions:
  - Continue monitoring short-term economic situation and liquidity; propose a tightening of the policy rate at the next Monetary Policy Committee (MPC) meeting in June 2023; further tightening if necessary.
  - Strengthen the reserve requirement ratio on domestic currency deposits: propose to the CPM to set the mandatory reserve ratio at 10 percent in June 2023, compared to 0 percent currently.
    - Estimated absorption from this coefficient: about CDF300 billion of structural excess liquidity.
    - This measure will absorb the entire impact of the 2.5 percent reduction in the crystallized stock of reserve requirements on foreign currency deposits (¶30) (equivalent to slightly less than 2 percent of the stock of deposits in Congolese francs).
    - MPC may increase the reserve requirement ratio if needed to absorb sustained increases in excess liquidity.
  - Use the stock of BCC bills (which increased significantly in 2022) to partially absorb cyclical surplus liquidity; modulate ranges for offers of BCC bills to target cyclical liquidity while reserve requirements absorb structural liquidity.

### External position and international reserves
- Met end-2022 target: accumulated net reserves of US$1,200 million, against the adjusted target of US$1,146 million dollars (end-December 2022 QPC).
  - Net foreign exchange purchases contributed 381 million dollars.
- Reserves adequacy noted as low: two months of imports at end-2022.
- Targets and requests:
  - Aim to achieve net accumulation of at least US$250 million dollars in the first half of 2023 (end-June 2023 QPC) and US$700 million by end-2023 (end-December 2023 QPC).
  - Request to lower the proposed end-June 2023 floor on changes in NIR to US$250 million (from US$430 million dollars) due to shortfalls in mining FX tax payments and disbursements of budgetary assistance, anticipated decreases in balances of foreign currency accounts with local correspondents (¶31), absence of new guarantees on central government borrowing, and scheduled repayment of existing guarantees.
- Commitment to improve international reserves data:
  - Ensure encumbered or unconditionally unavailable assets at BIS are held in separate subaccounts.
  - Revalidate data on changes in NIR since end-December 2020.

### Exchange rate policy and commitments
- Maintain exchange rate flexibility; exchange rate to remain a buffer for external shocks.
- Exchange policy guided by reserves adequacy and price stability; BCC intervention to accumulate reserves and smooth extreme volatility.
- Ensure indicative rate for the Congolese franc reflects market forces:
  - On May 8, 2023, eliminated the 2020 rule preventing banks from applying an ask rate exceeding a margin of 2.5 percent of the indicative rate published by the BCC at close of business on the preceding day.
- Continuous policy commitments:
  - Not to impose or intensify restrictions on payments and transfers for current international transactions.
  - Not to introduce or modify multiple currency practices.
  - Not to conclude bilateral payment agreements inconsistent with Article VIII.
  - Not to impose or intensify import restrictions for balance of payments reasons.

### Modernization of the monetary policy framework
- Refrain from BCC advances to finance the public budget deficit per BCC Organic Law, Law on Public Finance, and Stability Pact; adhere to ceilings on changes in net BCC credit to government and on BCC’s net domestic assets (QPCs).
- BCC will refrain from contracting further guarantees for central government borrowing and will debit deposits used as collateral for existing loans in favor of international reserves (IT).
- Reserve requirements on FX deposits:
  - Since January 2022, fulfilled in FX for deposits more than their end-2021 level.
  - Crystallized stock in local currency: CDF2,375.6 billion.
    - Reduce by CDF59 billion (2.5 percent) by end-June 2023 and by CDF118.7 billion (5 percent) by end-2023, to be converted into a reserve fulfilled in FX.
  - Drawdown the additional local currency liquidity resulting from this reform (¶27).
  - Issue revised Instruction 10 in June 2023; crystallized stock thereafter adjusted for exchange rate fluctuations; over-provision of reserve requirement on FX deposits fulfilled in domestic currency will be restituted to affected commercial banks.
- Implement Forecasting and Policy Analysis System (FPAS) by 2024 with multiyear IMF technical assistance; operationalize to strengthen monetary policy-making.
- Publish a timetable of MPC meetings and report extensively on committee decisions, including press releases and press conferences; strengthen outreach and messaging.

### BCC governance, financial reporting, and reserves management
- Recapitalization:
  - Analysis of BCC recapitalization needs validated by its Board on November 7, 2022; will serve as basis for a memorandum of understanding on recapitalization (end-September 2023 SB).
  - Recapitalization to strengthen BCC financial and operational autonomy and support monetary policy operations.
- Financial reporting and audits:
  - BCC financial statements to be issued in compliance with IFRS starting with FY 2023.
  - Commitments: recruit and train personnel in IFRS; complete external audit of the BCC Pension Fund (in progress); externally audit accounts for the reference year; carry out an actuarial study on personnel benefits.
- Procurement and operational units:
  - A procurement unit to be set up in July 2023 to complete procurement rules; BCC requested World Bank technical assistance; rules to be adopted by the BCC Board by end-November 2023 (initially planned for June 2022).
- Foreign exchange reserves management:
  - Cap foreign currency assets held with local correspondents (excluding deposits pledged as collateral for central government borrowing) at US$250 million by end-June 2023 and at US$200 million at end-December 2023 (end-June 2023 and end-December 2023 QPCs).
  - Will not debit international reserves if doing so would cause balances with local correspondents to exceed the most recent ceiling.
  - Closed one foreign exchange account in April, plan to close another by end-June 2023.
  - Open no new foreign exchange accounts with local correspondent institutions.
  - BCC to prepare a plan by end-July 2023 to close foreign exchange accounts with local correspondent institutions.
- Governance and compliance functions:
  - Establish a compliance function based on AML/CFT, ethics, and fight against internal and external fraud; an AML/CFT internal risk mapping exercise is being prepared and will be validated by the BCC Board.
  - Strengthen independence and capacity of internal audit function; update internal audit charter planned in June 2023 (initially scheduled for end-2022).
  - BCC Board’s audit committee finalized its first annual report; summary to be published in the BCC’s 2022 annual report.
  - Strengthen operational frameworks and governance of reserves management and emergency liquidity assistance with IMF technical assistance.

### Limiting cash use and AML/CFT alignment
- Curb use of cash in BCC operations; implement framework for execution of Treasury and BCC operations aligned with the AML/CFT law of December 27, 2022 (proposed end-May 2024 SB).
- Review Instructions 15 and 15bis to align them with FATF standards to support eventual removal from the FATF grey list.

### Financial sector reforms and supervisory strengthening (IMF TA 2023–26)
- Regulatory reforms:
  - New banking law promulgated in December 2022.
  - With IMF technical assistance, revise instructions 17, 18, 21, and 22 for credit institutions other than microfinance institutions; instruction 19 for credit institutions and financial companies; instructions 7, 8, and 41 for microfinance institutions.
  - Draft new instructions on internal control, licensing, and governance for financial companies; instruction on payment institutions (proposed end-November 2023 SB).
  - Publish instruction on identifying and managing risks associated with transactions with related parties in accordance with the 20th Basel Core Principle (end-November 2023 SB).
  - Define prudential regulation for payment institutions by December 2023.
- Supervision and stress testing:
  - Pilot mission to review credit files with IMF technical assistance completed in May 2023; on-site inspections for other banks starting June 2023.
  - Establish a stress test committee for non-performing loans; provide qualified staff and training.
  - Recruit and retain banking experts; implement risk-based supervision; create a dedicated IT risk unit within the Directorate of surveillance of financial intermediaries (DSIF) by September 2023 (initially scheduled for December 2022).
- Crisis management and safety net:
  - Adopt by end-December 2023 an instruction specifying elements for banks' preventive and recovery planning, including liquidity crisis scenarios and loss of correspondent relationships; commercial banks to submit plans by December 2024.
  - Align emergency liquidity framework with international best practices; review cross-border cooperation agreements with home countries of DRC-based banks' parent companies to integrate recovery and resolution planning.
- Financial stability and macroprudential framework:
  - Create a financial stability function to support the Financial Stability Committee (set up November 2021) and provide required resources.
  - Strengthen supervision of nonbank financial institutions.
  - Develop surveillance and early warning tools to analyze sectoral interconnections and interdependence.

### Financial inclusion and microfinance
- Finalize national strategy for financial inclusion by end-June 2023 (initially scheduled for December 2022), based on the World Bank’s report on financial sector development.
- Strategy objectives:
  - Improve access to financial services and products.
  - Increase lending to households and SMEs.
  - Increase use of mobile money and other fintech services.
  - Educate and protect consumers.
  - Strengthen infrastructure and institutions.
  - Expand range of insurance services for individuals and businesses.
- Restructure and strengthen microfinance institutions to support financial inclusion.

### Structural reforms: governance, anti-corruption, and justice
- Strengthen the Agency to Prevent and Combat Corruption (APLC) reporting to the Office of the President, in line with UNCAC and leading international practices.
- UNODC acknowledged receipt of information for second cycle of UNCAC Implementation Review Mechanism (October 2022).
- Audit Court management and new magistrates appointed and sworn in on August 31, 2022.
  - Strengthen Audit Office resources with a budgetary allocation of CDF49 billion in the 2023 Budget Law, compared to CDF22 billion in 2022.
- Validate the National Justice Reform Policy and the National Strategy to Combat Corruption; General Inspectorate of Finance continues supervisory functions and has published reports on its internet site.

### Mining sector governance, transparency, and social/environmental issues
- EITI validation process completed: EITI Board on October 13, 2022, announced DRC obtained a high overall score with a satisfactory response to most requirements; further progress needed on transparency and publishing beneficial ownership information on mining contracts.
- Government will continue to support EITI and meet necessary budgetary allocations.
- Government to draw on EITI reports published in February and March 2023: EITI 2020-2021 report; thematic report on strengthening disclosures of state-owned enterprises in the extractive sector; report on social and environmental obligations of extractive enterprises in Haut Katanga, Lualaba, and Haut-Uéle.
- Commitments:
  - Continue to publish new contracts (continuous SB) in accordance with the Mining Code and EITI standards, including renegotiated contracts.
  - Continue publishing financial statements of Gécamines, including auditors’ comments (as with 2020-21 accounts).
- Cobalt-specific measures:
  - Recognize DRC would have 60 to 70 percent of world reserves of cobalt; artisanal share estimated at up to 20 percent.
  - Work on improving human rights (including effective prohibition of child labor) and environmental impacts, guarantee a fair price for artisanal workers, and promote better traceability of exports and benefit taxes for the state.

*Source: 1codea2023002 — IMF (excerpt).*

### 37. We are committed to improving the AML/CFT framework and its effectiveness:

### 37. We are committed to improving the AML/CFT framework and its effectiveness:

### AML/CFT legal and institutional reforms
- Enacted new AML/CFT law No. 22/068 on December 27, 2022, with provisions that:
  - expand the application of AML/CFT measures to the entire financial sector (beyond banks);
  - prohibit anonymous bank accounts;
  - strengthen due diligence measures for wire transfer customers;
  - establish basic customer due diligence requirements for correspondent banks;
  - strengthen due diligence measures for politically exposed persons (PEPs) and procedures for declaring the wealth of PEPs.
- Committed to addressing FATF-identified deficiencies that led to the DRC’s inclusion on the FATF “grey list” under an action plan agreed with the FATF.
- Final report of the national ML/FT risk assessment (prepared with World Bank technical assistance) presented to the Council of Ministers on April 21, 2023, and to the FATF International Cooperation Review Group in May 2023.
- Decree creating a task force to drive reforms and monitor progress to be signed in June 2023; task force architecture:
  - high-level committee headed by the Prime Minister;
  - inter-institutional committee;
  - technical secretariat.
- CENAREF implementation of the action plan benefits from technical assistance from the European Union, the World Bank, the United States and Germany; technical assistance committee coordinates support.

### Commitments to operationalize AML/CFT improvements
- Ensure that authorities will:
  - assign supervisory authorities for all designated business sectors and non-financial professions, and develop and implement a risk-based supervisory plan;
  - adequately resource and strengthen the capacity of CENAREF to carry out its missions;
  - strengthen AML/CFT investigative and prosecutorial capabilities;
  - effectively implement a targeted financial sanctions regime related to terrorism and its financing.

### Private investment and business climate reforms (¶38)
- Adopted a roadmap comprising nearly 70 reforms coordinated by the business climate unit (Office of the President) and ANAPI to:
  - foster business creation (introduce a business visa; establish a one-stop shop for issuing licenses, permits, and specific authorizations);
  - promote access to electricity;
  - facilitate property transfer (database of land register transactions; digitalization of Kinshasa real estate plans; reduction of transfer delays from 38 to 15 days);
  - facilitate international trade (promote logistics platforms; establish commission for settlement of commercial disputes; adopt law on e-commerce and e-trade).
- Commit to a fair and predictable tax collection system that avoids accusations of tax harassment while pursuing revenue mobilization alongside improvements in the business climate.
- Improve the judicial system for resolution of business disputes, and apply and protect property and contractual rights.
- Establishment of the National Barometer for the Business Climate announced August 26, 2022; first barometer unveiled on June 6, 2023, and to be followed by a plan of urgent measures to improve the business climate by end June 2023.

### Strengthening PPP legal and institutional framework (¶39)
- Under Law No. 18/016 of July 09, 2018 (relating to PPPs), commit to sign by end-October 2023 the decrees implementing the law regulating:
  - procedures for granting government guarantees;
  - procedures for approving PPP contracts;
  - procedures for referral of issues to the public entity in question;
  - procedures for carrying out the preliminary comparative assessment of PPP options in comparison with other forms of government procurement (end-June 2023 SB).
- Commit to publish all PPP-related contracts on ARMP’s internet site.
- Institutional framework revisions by end-November 2023 (with IMF technical assistance) to clarify roles and responsibilities:
  - Ministry of Planning: project identification and selection;
  - sectoral ministries: negotiating PPPs with assistance from the UC-PPP (PPP Advice and Coordination Unit);
  - ministries of finance and the budget: approving PPP projects after evaluation, including analyzing budgetary risks.
- In 2023, establish the register of guarantees at the DGDP of the Ministry of Finance and an exhaustive register of PPPs at the ARMP and the UC-PPP.

### Safeguards before establishing a national development bank (¶40)
- Full range of necessary safeguard measures to be implemented prior to commencing operations of a national development bank or any new public or para-public financial institution, including:
  - prepare a business plan identifying financing sources, analyzing fiscal risks, specifying a sound governance structure, and establishing a system for portfolio credit risk analysis in coordination with Fund staff prior to operations;
  - require compliance with procurement procedures applicable to government institutions during operations;
  - ensure supervision of the bank by the BCC;
  - rationalize public financial agencies and corporations to consolidate efforts.

### Institutional capacity, technical assistance, and statistics (¶41–42)
- Continue to strengthen institutional capacities with partner support; technical assistance has supported diagnostic studies including a comprehensive assessment of governance, the FSSR and the PIMA.
- IMF Fiscal Affairs Department expert (funded by the Japanese government project “Strengthening Fiscal Sustainability in the Fragile States of sub-Saharan Africa”) on station since November 2022; a fiscal expert funded by Belgian technical cooperation (Enabel) posted in Kinshasa cooperating with IMF technical assistance services.
- BCC and IMF Monetary and Capital Markets Department collaboration: IMF experts to be placed at the BCC.
- Commit to ensuring data specified in the TMU are provided proactively and in a timely fashion.
- Published revised GDP series through 2019 with 2005 base year in accordance with SNA 1993; update for 2020 and 2021 to be published by end-June 2023; rebasing of GDP on year 2019 to be done as part of migration to SNA 2008 to be launched in 2023.
- Since March 2023, BCC transmitting financial soundness indicators to the IMF monthly.
- BCC commits that the DSIF will provide access rights to statisticians of the Directorate of Research and Statistics (DRS) and the Directorate of Economic Analysis (DAE) to download aggregate financial statements of banks to produce more reliable and up-to-date monetary data.
- Continued support to the National Institute of Statistics and other government institutions for official statistics; priorities include improving data on debt (state-owned enterprises and provinces), debt management, quality and frequency of BCC data transmission, and accuracy of economic indicators.

### Program monitoring, reviews, and conditionality (¶43; Tables 1–2 summary)
- The Extended Credit Facility (ECF) arrangement program will be evaluated on the basis of quantitative performance criteria, indicative targets, and structural benchmarks in connection with semiannual reviews.
- Fifth and sixth reviews expected on or after September 15, 2023, and March 15, 2024, respectively, based on test dates for periodic performance criteria for end-June 2023 and end-December 2023.
- A technical troika chaired by the Ministry of Finance and comprising the Ministry of Budget and the BCC will monitor program implementation; CTR will handle coordination, technical secretarial services, and liaison with the IMF per the TMU.
- BCC’s external auditors will validate quantitative monetary criteria and transactions through the account monitored by the IMF and maintained with the BIS at the test dates.
- Structural conditionality (selected items and statuses as reported):
  - Prior actions met: BCC Board fully constituted; EITI roadmap on mining transparency adopted.
  - Third Review Prior action met: publish renegotiated contract allowing return of mining assets to the State.
  - Multiple structural benchmarks with dates in 2021–2024 classified as Met, Not met, Proposed, or Continuous status in Table 2 (examples include adoption of reserve requirement regulation—End-December 2021 Met; adopt decree on public investment management—End-May 2023 Met; establish framework for Treasury and BCC operations in accordance with the AML/CFT law—End-May 2024).
  - Continuous structural conditionality: publish all new mining agreements in accordance with the Mining Code and EITI standards (status reported variably as Met or Not Met across reviews).

*DEMOCRATIC REPUBLIC OF THE CONGO — INTERNATIONAL MONETARY FUND*

### 1. This Technical Memorandum of Understanding (TMU) contains definitions and adjuster

### 1codea2023002 - 1. This Technical Memorandum of Understanding (TMU) contains definitions and adjuster

### A. Definitions — institutional scope, measurement basis, and exchange rates
- Performance criteria and indicative targets are evaluated in terms of cumulative flows since the beginning of each calendar year.
- External and domestic are defined on a residency basis.
- Institutional coverage:
  - The central government comprises all units of government that exercise authority over the entire economic territory; nonprofit organizations controlled and financed by the central government are excluded unless otherwise indicated.
  - The banking system comprises the Central Bank of the Congo (BCC) and deposit-taking institutions.
- Program exchange rates (BCC indicative rates as of December 31, 2020):
  - Variables denominated in U.S. dollars: CDF1,971.8046 per U.S. dollar.
  - Variables denominated in SDRs: CDF2,852.0774 per SDR.
  - Variables denominated in euros: CDF2,421.1594 per euro.
  - Variables in currencies other than the U.S. dollar, SDR or Euro: first converted to U.S. dollars at the December 31, 2020, US$/currency official exchange rate (IMF International Financial Statistics), then converted to Congolese Francs by using the program exchange rate CDF/$.
- Quantitative Performance Criteria (QPCs) covered by the program (paragraph 5):
  - Net international reserves (NIR) of the BCC.
  - Foreign currency assets of the BCC held with domestic correspondents.
  - Net BCC credit to the government.
  - Net domestic assets (NDA) of the BCC.
  - External payments arrears.
  - Contracting or guaranteeing of new external debt by the public sector.
  - Domestic fiscal balance (cash basis).
- Timing of targets:
  - Performance criteria are set for end-June 2023 and end-December 2023.
  - Indicative targets are set for end-September 2023 and end-March 2024.
- Continuous (non-quantitative) QPCs include:
  - Non-introduction or intensification of restrictions on payments and transfers for current international transactions.
  - Non-introduction or modification of multiple currency practices.
  - Non-conclusion of bilateral payments agreements inconsistent with Article VIII.
  - Non-imposition or intensification of import restrictions for balance of payments reasons.

### B. Quantitative Performance Criteria and Adjustors — definitions and adjustment mechanics
- Net International Reserves (NIR)
  - Definition: NIR = BCC gross foreign reserves − BCC total foreign liabilities, excluding SDR allocations.
  - Gross foreign reserves (BPM6-consistent) include: (i) monetary gold holdings of the BCC kept abroad; (ii) SDR holdings kept abroad; (iii) receipts in foreign currency; and (v) convertible claims on nonresidents (foreign deposits and foreign securities).
  - Exclusions from gross foreign reserves: claims on residents in foreign exchange, nonconvertible currency holdings, assets whose availability is conditional, assets encumbered or pledged (including reserve assets used as collateral), and swap transactions.
  - Total foreign liabilities: all BCC foreign exchange liabilities to nonresidents, including the IMF but excluding SDR allocations.
- NIR floor adjustors (paragraph 10):
  - Balance of payments support (BPS): adjust NIR floors upward by an amount equivalent to 50 percent of BPS in excess of programmed levels; adjust downward by an amount equivalent to 50 percent of the shortfall of BPS relative to programmed levels.
  - External debt service payment: adjust NIR floors upward by an amount equivalent to under payment of external debt service relative to programmed amounts; adjust downward by an amount equivalent to the excess of external debt service payments relative to programmed amounts.
  - Privatization proceeds in convertible currencies (PPCC): adjust NIR floors upward by 50 percent of total PPCC in excess of programmed levels; no downward adjustment for shortfalls.
- Definitions relevant to adjustors:
  - BPS: all disbursed foreign grants and loans to the central government, excluding those tied to projects.
  - External debt service payments (central government): interest and principal due to foreign creditors (excluding the IMF).
- Foreign currency assets of the BCC held with domestic correspondents (ceiling definition):
  - Defined as BCC assets denominated in any currency other than the Congolese franc, held with institutions or subsidiaries domiciled in the Democratic Republic of Congo, excluding BCC deposits used as collateral/guarantee for central government loans (see ¶29).
- Net Domestic Assets (NDA) of the BCC (ceiling definition and composition):
  - NDA = narrow base money (¶15) − NIR (¶7) − external assets excluded from NIR − Treasury securities issued for the benefit of the BCC (¶17) −, beginning in December 2022, reserve requirements fulfilled by deposit-taking institutions.
  - NDA components include: (i) net credit to the central government (¶16); (ii) credit to the private sector; (iii) credit to public enterprises; (iv) credit to commercial banks; (v) other claims on the rest of the economy; and (vi) other net assets.
  - Narrow base money is the sum of: (i) currency in circulation; (ii) cash holdings by banks; (iii) bank deposits held with the BCC; (iv) nonbank private sector deposits held with the BCC; and (v) public enterprises deposits held with the BCC.
- NDA ceiling adjustors:
  - BPS: NDA ceilings adjusted downward by an amount equivalent to 50 percent of BPS in excess of the programmed level; adjusted upward by 50 percent of the shortfall of BPS relative to programmed levels.
  - External debt service payment: NDA ceilings adjusted downward by under payment relative to programmed amounts; adjusted upward by the excess of external debt service payments relative to programmed amounts.
  - Statutory reserve requirements for foreign currency deposits: before December 2022, NDA ceilings will be adjusted upwards (downwards) by the increase (decrease) in statutory reserve requirements for foreign currency deposits relative to program projections (memorandum item).
  - Privatization proceeds: NDA ceilings adjusted downward by 50 percent of total privatization proceeds (including PPCC) in excess of programmed level; no upward adjustment for shortfalls.
- Net central bank credit to the central government (NCG) — definition and adjustors:
  - NCG = gross BCC claims on the central government − central government deposits at the BCC.
  - Government deposits include those related to the Convention on the distribution of SDRs between the government and the BCC.
  - Exclusions for program monitoring: central government deposits related to externally financed projects and Treasury securities issued for the benefit of the BCC are excluded from NCG.
  - Treasury securities for the benefit of the BCC:
    - Remunerated securities issued by the Treasury to recapitalize the BCC or regularize historical claims, covering past operating losses, unsecuritized operating losses from 2011 and later years, unpaid interest payments for securities linked to operating losses of the BCC, and foreign currency translation losses.
    - Include Treasury bonds redeemable at maturity resulting from the December 2021 Memorandum of Understanding (and April 2022 amendment).
    - Exclusions: non-remunerated BCC credit to the government, non-interest yielding Treasury securities, and BCC advances to the Treasury.
  - NCG ceiling adjustors:
    - BPS: NCG ceilings adjusted downward by 50 percent of total BPS in excess of the programmed level; adjusted upward by 50 percent of the shortfall of BPS relative to programmed levels.
    - External debt service payment: NCG ceilings adjusted downward by under payment relative to programmed amounts; adjusted upward by the excess of external debt service payments relative to programmed amounts.
    - Privatization proceeds: NCG ceilings adjusted downward by 50 percent of total privatization proceeds (including PPCC) in excess of programmed levels; no upward adjustment for shortfalls.
- Domestic fiscal balance (cash basis) — definition and adjustors:
  - Domestic fiscal balance = domestic revenue − domestically financed expenditure.
  - Domestic revenue = total revenue and grants − grants.
  - Domestically financed expenditure = total expenditure − externally financed investments (loans and grants) − foreign interest payments + net accumulation of domestic arrears.
  - Adjustments to the domestic fiscal balance floor:
    - Domestic arrears payments: adjust downward (higher deficit) by domestic arrears repayments above programmed amount; symmetrically adjust upward (lower deficit) by repayments below programmed amount.
    - Domestically-financed investment: adjust upward (lower deficit) by the amount of domestically-financed investment made below programmed amount.
    - Privatization proceeds: adjust upward by the full shortfall of privatization relative to programmed levels; adjust downward by 50 percent of privatization proceeds in excess of programmed levels.
    - Revenues of the central government: adjust floors upward by an amount equivalent to 80 percent of revenues in excess of the programmed level; no downward adjustment for revenue shortfalls.
  - Definition: Domestic arrears are obligations to domestic public suppliers unpaid by the contractual due date with a delay of at least 60 days, including VAT credits due but not reimbursed, and must be certified and validated by the government.
- Ceilings on the accumulation of external payment arrears:
  - External payment arrears = external debt service obligations (principal and interest) of the central government not paid on the contractual due date.
  - The ceiling on new external payment arrears applies continuously throughout the period covered by the Extended Credit Facility (ECF) arrangement.
  - Exemptions: arrears in the process of renegotiation or cases where the creditor has agreed to suspension of payments pending negotiations.
  - Reporting requirement: the government will immediately report to IMF staff any new external arrears it accumulates.
- Ceilings on the present value (PV) of contracting or guaranteeing of new external debt by the public sector:
  - Public sector includes the central government, local governments, the BCC, state-owned enterprises, decentralized territorial entities and public entities controlled and financed by the central government.
  - Note: Only Gécamines, SNEL, and MIBA are included in the QPC.
  - Debt definition follows paragraph 8 of the Guidelines on Public Debt Conditionality in Fund Arrangements (Executive Board Decision No.16919-(20-103), October 28, 2020).
  - External debt is contracted when all parties sign the debt contract; measured on a gross basis using the residency criterion.
  - Guarantees: arise from explicit legal obligations to service a debt in event of debtor nonpayment or implicit legal/contractual obligations to finance shortfalls.
  - PV calculation:
    - Discount projected disbursements and debt service (principal and interest) using a program discount rate of 5 percent.
    - Account for all loan conditions, projected disbursements, maturity, grace period, payment schedule, front-end fees and management fees.
    - Use the IMF “Fund’s concessionality calculator.”
    - If grant element is zero or less than zero, PV is set equal to face value.
  - Coverage: From March 2022, a QPC applies to PV of new external debt (debt by non-residents) contracted or guaranteed by the public sector with original maturities of one year or more; applies to debt contracted or guaranteed for which value has not yet been received.
  - Exclusions: use of Fund resources and normal import credits having a maturity of up to one year.
  - Reporting requirement: authorities will inform IMF staff of planned external borrowing and conditions before loans are contracted or guaranteed and will consult staff on potential debt management operations.

### C. Indicative Targets — collateral deposits, revenues, social spending, and arrears
- Deposits of the BCC used as collateral/guarantee for central government loans (indicative ceiling definition):
  - Cover central government loans guaranteed by the BCC and include central government liabilities secured by liens over BCC deposits in local or foreign currency.
- Revenues of the central government (floors; cash basis; GFSM 2001 alignment):
  - Revenues defined on a cash basis, excluding grants.
  - Included: taxes and compulsory transfers, property income, sales of goods and services, social contributions (excluding pension contributions received by the central government), interest, fines, penalties and forfeits, and voluntary transfers from non-government other than grants.
  - Excluded: grants and other noncompulsory contributions from foreign governments and international organizations; receipts from sale of nonfinancial assets (privatization and signature bonuses); transactions in financial assets and liabilities (borrowing except interest payments); transfer of profits from BCC to the Treasury; revenue of special accounts and budgets.
  - Recognition principle: Revenues recognized when cash is received; exceptional advanced payments treated as if received on the normal due date.
- Social spending (floors; central government expenditures excluding wages):
  - Defined as the sum of:
    - Reproductive, Maternal, Neonatal, Child and Adolescent Health (RMNCAH) and primary health care spending.
    - Disbursement of Gavi-supported vaccine co-financing and traditional vaccines procurement.
    - Disbursement of TB/Malaria/HIV/AIDS co-financing.
  - Text Table: presents Democratic Republic of the Congo: Indicative Target for Social Spending (In billion CDF, cumulative from the beginning of year). (Table source: Congolese authorities and IMF staff estimates; World Bank covers financing of traditional vaccines in 2021–22; estimates for Dec-22.)
- Ceilings on the accumulation of wage arrears of the central government: subject heading present; specific definitions and limits follow in subsequent text (not included in the supplied extract).

*Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1codea2023002.pdf*

### 32. Definition: Wage arrears are defined as approved personnel wages and salaries that have

### 1codea2023002 - 32. Definition: Wage arrears are defined as approved personnel wages and salaries that have

### Definitions and Fiscal Controls
- Wage arrears:
  - Defined as approved personnel wages and salaries that have not been paid for 60 days.
  - Wages and salaries include the total compensation paid to public service employees, including permanent benefits.
  - These arrears will be valued on a cumulative basis from July 1, 2021.
- Public service employees:
  - Defined as civil, police, and military personnel either statutory civil servants or under contract of the central government.
- Wage bill:
  - Defined as the total compensation paid to public service employees (see ¶33), including permanent benefits.
- Central government expenditures executed under emergency procedures:
  - Defined as expenditures that have not been executed according to the normal procedures of the expenditure chain.
  - The ceiling is defined quarterly as the percentage of central government expenditure executed under emergency procedures relative to total domestically financed central government expenditure.

### Data Reporting Requirements for Program Monitoring (selected items and timelines)
- General: The authorities of the DRC will provide IMF staff with the data needed to monitor the program within the prescribed time limits.
- Selected data items, reporting institutions, frequency, and reporting lags:
  - Exchange rates and FX market statistics — BCC (DOBM; DRS) — Daily (Weekly) — 1 business day.
  - External assets and liabilities of the BCC — BCC (DOBM) — Daily (Weekly) — 1 business day.
  - Monetary policy instruments and interventions — BCC — Daily (Weekly) — 1 business day.
  - Reserves of deposit institutions at the BCC — BCC (DSIF) — Daily (Weekly) — 1 business day.
  - Depository Corporations Survey (DCS) — BCC — Monthly — 10 business days.
  - Detailed monetary survey — BCC — Monthly — 10 business days.
  - Government deposits at the BCC and commercial banks — BCC — Monthly — 10 business days.
  - BCC Guarantees — BCC — Monthly — 10 business days.
  - BIS 2D FMI USD account statement — BCC — Monthly — 10 business days.
  - Quantitative performance criteria monitoring (NIR, net BCC credit to government, BCC NDA, foreign currency assets of the BCC held with domestic correspondents) — BCC — Monthly — 15 business days.
  - Expenditures made using emergency procedures — Comité des urgences — Quarterly — 15 business days.
  - Revenues from customs and excise taxes — DGDA — Monthly — 40 business days.
  - Revenues from direct and indirect taxes — DGI — Monthly — 40 business days.
  - Revenues from the mining sector — DGI — Monthly — 40 business days.
  - Status of natural resource revenue collection — Ministry of Finance (CTR) — Quarterly — 20 business days.
  - Government cash flow plan (Plan de trésorerie, PTR) — Ministry of Finance (DGTCP) — Weekly — 5 business days.
  - Treasury bills and bonds (issuance amounts, maturities, interest rates; amortization) — Ministry of Finance (Comité des titres) — Weekly — 3 business days.
  - Budget arrears (updated stock) — Ministry of Budget (DCB) — Annual — 15 business days.
  - Budget tracking report (État de suivi budgétaire) — Ministry of Budget (DGPPB) — Monthly — 10 business days.
  - Wage arrears (stock, including details per category) — Ministry of Budget (Direction de la Paie) — Monthly — 60 business days.
  - Economic outlook note (prepared for meeting with the Prime Minister) — Ministry of Planning (DEME) — Weekly — 3 business days.

### Debt Sustainability, Risk Assessment, and Public Debt Coverage
- Risk ratings:
  - Risk of external debt distress: Moderate.
  - Overall risk of debt distress: Moderate.
  - Granularity in the risk rating: Substantial space to absorb shocks.
  - Application of judgment: No.
- Debt-carrying capacity:
  - The DRC’s debt-carrying capacity remains weak.
  - Composite Indicator: 2.23 (based on the April 2023 World Economic Outlook and the latest CPIA vintage (2021)).
- Key findings and vulnerabilities:
  - Weak revenue mobilization is a main determinant for the DRC’s moderate risk of debt distress given low external debt.
  - External debt thresholds for both solvency and liquidity risks are breached under stress tests, highlighting vulnerability to external shocks, primarily a negative shock to exports.
  - Given limited buffers and exposure to volatile commodity prices, prudent borrowing policies prioritizing concessional loans and strengthening debt management policies remain essential to debt sustainability.

- Public and publicly guaranteed (PPG) external and domestic debt coverage:
  - Coverage includes debt contracted and guaranteed by the central government, the Central Bank of Congo (BCC), provinces, and part of state-owned enterprises (SOEs).
  - The public debt department (DGDP) publishes quarterly and annual reports based on residency criteria.
  - Authorities are finalizing a draft law to harmonize the legal framework, reaffirm the exclusive role of the Ministry of Finance in contracting external debt, and strengthen the mandate of the DGDP, including monitoring SOEs’ debt.
  - Under the World Bank Sustainable Development Finance Policy (SDFP) PPA2, authorities improved debt report coverage to include reporting of SOEs and provinces’ debt.

### Background, Recent Macroeconomic Developments, and Key Statistics
- Economic performance and outlook:
  - Real GDP growth: 6.2 percent in 2021; 8.9 percent in 2022; projected at 6.8 percent in 2023.
  - Primary deficit: expected to widen from 0.2 percent in 2022 to 1.1 percent in 2023.
  - Reserves: strengthened in 2022, reaching about 8 weeks of non-aid related imports at end-2022.
- Arrears and debt stock:
  - External arrears amount to US$254.5 million.
  - At end-2022, the public debt ratio was 22 percent of GDP (lower by about 2 percentage points of GDP vis-à-vis 2021).
  - External public debt-to-GDP decreased from 16.8 percent at end-2021 to 15.5 percent at end-2022.
  - Domestic debt in 2022 decreased to 6.4 percent of GDP, mostly reflecting domestic arrears, Treasury bill and bond issuance, and recording of bank loans under the now phased-out CREDOCs.
  - Overall domestic debt is mostly composed of arrears: arrears estimated at 5.7 percent of GDP at end-2022.
  - Composition of reconciled arrears: reconciled arrears 3.8 percent of GDP; VAT arrears to exporters 1.0 percent of GDP; arrears to oil companies 0.6 percent of GDP.
- Public debt stock and composition (2022, selected figures):
  - Total debt stock: 14,224.5 (in M US$) — 100.0 percent of total debt — 21.6 percent of GDP.
  - External: 9,989.8 (in M US$) — 70.2 percent of total debt — 15.2 percent of GDP.
  - Domestic: 4,234.8 (in M US$) — 29.8 percent of total debt — 6.4 percent of GDP.
  - Multilateral creditors: 4,889.7 (in M US$) — 34.4 percent of total debt — 7.4 percent of GDP.
    - IMF: 2,233.5 (in M US$) — 15.7 percent of total debt — 3.4 percent of GDP.
    - World Bank: 2,124.8 (in M US$) — 14.9 percent of total debt — 3.2 percent of GDP.
  - Bilateral creditors: 4,592.6 (in M US$) — 32.3 percent of total debt — 7.0 percent of GDP.
    - Non-Paris Club: 4,485.2 (in M US$) — 31.5 percent of total debt — 6.8 percent of GDP.
      - Exim Bank of China: 4,007.6 (in M US$) — 28.2 percent of total debt — 6.1 percent of GDP.
  - Commercial creditors: 507.5 (in M US$) — 3.6 percent of total debt — 0.8 percent of GDP.
  - Domestic arrears: 3,720.0 (in M US$) — 26.2 percent of total debt — 5.7 percent of GDP.
  - Memo items:
    - Collateralized debt: 3,275.4 (in M US$) — 23.0 percent of total debt — 5.0 percent of GDP.
    - Contingent liabilities: 3,631.1 (in M US$) — 25.5 percent of total debt — 5.5 percent of GDP.
  - Nominal GDP (in M USD): 65,807.5.

### Policy Implications and Recommendations (as stated)
- Prioritize concessional loans in borrowing strategies.
- Strengthen debt management policies and monitoring, including improving debt reporting quality for SOEs and provinces.
- Maintain prudent borrowing given limited buffers and exposure to volatile commodity prices.
- Continue follow-up on IMF technical assistance recommendations and finalize legal reforms to centralize debt contracting and strengthen DGDP mandates.

*Prepared by the staffs of the International Monetary Fund (IMF) and the International Development Association (IDA) — June 14, 2023.*

### 7.      Projections underlying this DSA are underpinned by the macroeconomic framework of the

### 1codea2023002 - 7.      Projections underlying this DSA are underpinned by the macroeconomic framework of the

### Macroeconomic framework and near-term projections
- Projections underpinning this DSA are based on the macroeconomic framework of the fourth review of the ECF-supported arrangement.
- Real GDP growth:
  - GDP growth is expected to remain strong in 2023-28 (5.5   on average) due to new mining projects, high commodity prices, and strong global demand for DRC’s commodity exports.
- Trade balance:
  - Starting from 5.0 percent of GDP in 2022, the trade deficit is expected to decrease to 4.4   percent in the medium term.
  - Recovery follows two years of exceptionally strong import growth.
- Risks to the outlook:
  - Upcoming elections, escalation of the conflict in the East, and a reversal of commodity prices.
- Public spending and financing:
  - Ambitious public spending on education and infrastructure relies on available additional financing sources in the context of the catalytic role of the ECF arrangement and domestic revenue mobilization efforts.
  - Domestic revenue mobilization will hinge on plans to broaden the tax base, improve tax compliance, restore VAT functioning, and modernize and digitalize revenue collection.
- Investment inflows and financing terms:
  - Sizable other investment inflows, including project financing.
  - Strengthened reserve accumulation in 2022 despite a deteriorated current account.
  - Multilateral and bilateral loans remain the main sources of debt financing.
  - Contracted external borrowing is projected to amount to $4.0 billion and $2.3 billion in 2023   and 2024, respectively.
  - Financial terms of new lending are projected to remain largely concessional, with an increase of lending at non-concessional terms over the medium term.
- Domestic debt market:
  - Treasury Bill and Bonds gross issuances amounted to US$637 million in 2022 (1 percent of GDP), and are expected to increase as domestic markets deepen and concessional financing gradually declines over the long term.

### Box 1 — Macroeconomic Assumptions for 2023–43
- Real GDP growth:
  - Growth is expected to average at about 5.0 percent over the medium to long term, driven by sustained increases in mining production, supportive commodity prices, and a gradual increase in public investment.
- Inflation:
  - After peaking at 11.5 percent in 2023, average inflation measured by GDP deflator growth is projected to stabilize around 6 percent in 2024-28 and beyond.
  - This is in line with the BCC’s target of keeping inflation below 7 percent.
- Primary balance:
  - The primary fiscal deficit is projected to average 0.8 percent of GDP in 2023-2028.
  - Capital expenditure is expected to rise over the projection period and to gradually shift towards domestic financing.
  - Revenues are computed as central government revenues plus revenues from SOEs that are assumed equivalent to their debt service flows.
- Current account balance:
  - The non-interest current account deficit averages 3.4   percent of GDP over 2023-2043.
  - Mineral exports constitute a significant portion of exports and are projected to improve on average over the medium term.
  - Imports are projected to rise gradually on the back of increasing demand for capital goods and intermediates for infrastructure investment.
- Financing composition:
  - External financing is projected to consist of concessional and non-concessional loans from multilateral, bilateral and commercial lenders, and FDI.
  - Part of financing of public investment projects would also stem from foreign grants.
  - Additional government financing needs are assumed to be covered by treasury bill issuance (70%) and treasury bond issuance with maturities below 7 years (30%) in the domestic market until 2033, with bond issuance assumed to increase (to 40%) by 2043.
- Gross official reserves:
  - Gross official reserves are expected to gradually rise to about 13 weeks of imports by 2028.
  - Reserve buildup is driven by stronger exports, financing under the program, and the catalytic effect of the ECF program.

### Debt carrying capacity, classification, and stress testing
- Debt carrying capacity:
  - DRC’s debt carrying capacity is classified as weak.
  - DRC’s CI score is 2.23, roughly unchanged compared to previous vintages.
- Stress tests employed:
  - Six standardized stress tests and two tailored stress tests (commodity price shock and combined contingent liabilities shock).
  - Commodity price shock stress test is relevant because commodities accounted for about 97 percent of DRC’s exports of goods and services over the period 2018-20.
- Applicable thresholds excerpt (as presented):
  - PV of debt in % of GDP: 35
  - PV of total public debt in percent of GDP: 140 (Exports) / 30 (GDP) — as displayed in the source’s threshold table format
  - Debt service in % of Exports: 10
  - Debt service in % of Revenue: 14

### External PPG debt baseline and scenarios
- Baseline external debt outlook:
  - External debt increased from $9,615 million in 2021 to $9,990 million in 2022, driven by increased debt towards multilateral creditors.
  - Present value (PV) of external debt estimated at 11.7 percent of GDP in 2022, lower than the 30 percent benchmark, reflecting concessional debt.
  - Medium-term trajectory of external and public debt does not give rise to debt sustainability concerns under the currently favorable medium-term growth outlook.
  - End-June 2023 QPC on the present value of new external borrowing set at US$1500 million is on track to be met; end-December 2023 QPC set at US$2.5 billion.
- Alternative scenarios and export shock:
  - In the exports shock scenario, nominal exports fall by 19.5 percent in 2024 and 20.6 percent in 2025, relative to the previous year value.
  - Given a share of 70 percent for copper exports in total exports in 2022, the exports shock could be equivalently modeled as the combination of two consecutive 30 percent drops in 2024 and 2025 in the international price of copper, relative to baseline projections.
  - Debt-to-GDP and debt service-to-exports indicators breach thresholds under the most extreme shock scenario of lower nominal exports.

### Public debt sustainability and stress test outcomes
- Baseline public debt outlook:
  - Overall risk of debt distress is projected to remain moderate.
  - Public debt-to-GDP ratio does not breach its threshold in the baseline.
  - Recognition of yet uncertified VAT arrears and arrears to suppliers could raise domestic debt and total public debt.
  - Realization of guarantees and other contingent liabilities poses risks.
- Alternative scenarios:
  - The most extreme shock for PV of public debt to GDP is a sharp decline in exports; under such shock the PV of public debt ratio peaks at slightly less than the applicable threshold value of 35 percent.
  - Under this shock the public debt service-to-revenue ratio remains below their 2023 level of 16 percent of revenue in the medium term.

### Risk rating, vulnerabilities, and key policy implications
- Risk ratings:
  - External debt distress rating: Mechanical — Moderate; Final — Moderate.
  - Overall debt distress rating: Mechanical — Moderate; Final — Moderate.
  - Judgement was applied: No (for both ratings).
- Key vulnerabilities:
  - Fragility and high vulnerability to external shocks.
  - Commodity price fluctuations and export performance are principal vulnerabilities; exports are described as the Achilles’ heel of DRC’s debt sustainability.
  - Low revenue mobilization capacity.
  - Limited repayment capacity despite low total public debt.
- Fiscal and policy implications:
  - Preserve borrowing space created by favorable commodity prices by increasing international reserves, mobilizing revenue, and ensuring borrowed resources enhance inclusive growth and promote economic diversification.
  - Borrowing on non-concessional terms is projected to increase but should remain limited; DRC should continue to rely mostly on concessional sources.
  - Prudent fiscal policies are called for, including constraining new borrowing.
  - Structural reforms recommended in revenue mobilization, public financial management, and growth-enhancing public investment.
- Revenue mobilization projection under ECF:
  - Revenues are projected to increase from 9.5 percent of GDP in 2020 to 18 percent by 2028, compared to an average of 20 percent of GDP in SSA.
- Arrears and domestic debt:
  - At 0.4 percent of GDP, external arrears are below 1 percent of GDP, qualifying as a de minimis case.
  - Domestic arrears are to suppliers of goods and services and reflect inadequate public finance practices; authorities are enacting measures that lead to their reduction.

*Source: 1codea2023002 - 7.      Projections underlying this DSA are underpinned by the macroeconomic framework of the*

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

### 1codea2023002 - 19.      The authorities broadly agreed with the overall assessment of the country’s debt

### Authorities’ assessment and commitments
- The authorities "broadly agreed with the overall assessment of the country’s debt sustainability."
- Debt carrying capacity is "expected to improve against the backdrop of the ECF-supported arrangement."
- The authorities are committed to further improve debt management, including:
  - enhancing the reporting of SOE (with the inclusion of SOE debt in public debt statistics by 2023)
  - enhancing reporting of publicly guaranteed debt.

### Program context and recent macroeconomic developments
- Engagement: Financial assistance under the Extended Credit Facility (ECF) approved in July 2021 supports implementation of the 2019–23 National Strategic Development Plan (NSDP).
- Security and budgetary pressures:
  - Escalation of armed groups’ attacks in the eastern part of the country with significant adverse economic and humanitarian impacts.
  - Exceptional government expenditures for security and for provision of goods and services (shelter, food, education, health) to displaced persons.
  - Higher-than-expected expenditures, including for the organization of elections scheduled for December 2023, contributed to strong pressures on the budget, the exchange rate and inflation.
- Program performance: Despite the above, implementation of the ECF-supported program continued to be satisfactory.

### Growth and sectoral outcomes (exact figures preserved)
- Real GDP for 2022 is estimated at 8.9 percent, compared with 6.6 percent projected at the time of the third review.
- Mining sector growth for 2022 is estimated at 22.6 percent, compared with an initial forecast of 13.1 percent.
- Non-mining production experienced moderately lower-than-anticipated growth, constrained by heightened insecurity in the East and fallout from the war in Ukraine.

### Debt sustainability analytics and scenario highlights (as presented)
- Debt reporting and inclusion:
  - Inclusion of SOE debt in public debt statistics targeted by 2023.
- Stress-testing and scenarios (figures and notes summarized as presented):
  - Figures present indicators of Public and Publicly Guaranteed (PPG) external debt and public debt under alternative scenarios for 2023-33.
  - The "most extreme stress test" is defined as the test that yields the highest ratio in or before 2033; one-off breaches are presented where applicable with specified treatment.
  - Notes indicate that all additional financing needs generated by shocks under 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 public DSA allows for domestic financing to cover additional financing needs generated by shocks under the stress tests in the public DSA; default terms of marginal debt are based on baseline 10-year projections.

### Selected DSA baseline projections and key statistics (2020-43, values preserved as in source)
- External debt (nominal) 2020–2033 (percent of GDP and selected values): 16.8 16.8 15.5 17.2 17.2 16.4 15.5 14.3 13.4 9.3 5.5 9.1 13.4
- Identified net debt-creating flows: 3.4 0.0 -1.4 1.7 0.0 -0.7 -1.0 -1.1 -1.0 -0.6 -0.3
- Identified debt-creating flows (selected sequence): 5.8 1.4 5.3 6.6 5.3 4.1 3.9 3.7 4.4 4.5 7.0 4.3 4.8
- Exports (percent of GDP, selected values): 28.7 38.8 43.2 42.5 40.8 38.6 36.3 34.1 31.6 25.3 17.4
- PV of PPG external debt-to-GDP ratio (selected series): 11.7 12.4 12.1 11.3 10.3 9.2 8.5 5.8 3.5
- PV of PPG external debt-to-exports ratio (selected series): 27.2 29.3 29.6 29.2 28.4 27.1 27.1 22.8 19.9
- PPG debt service-to-exports ratio (selected series): 3.6 2.3 2.4 2.4 2.3 2.5 2.8 3.1 3.1 2.3 2.2
- PPG debt service-to-revenue ratio (selected series): 12.0 8.1 6.9 7.4 6.1 6.1 6.2 6.4 5.6 3.0 1.7
- Gross external financing need (Million of U.S. dollars, selected values): 2,922.0 2,674.9 5432.7 5,733.6 5,023.0 4,692.6 4,983.5 3,553.6 4,431.7 9,510.1 30,285.5
- Real GDP growth (in percent, selected series): 1.7 6.2 8.9 6.8 4.7 5.3 5.2 5.6 5.2 4.9 4.9 5.3 5.2
- GDP deflator in US dollar terms (change in percent, selected): -5.9 11.0 5.2 -2.4 4.9 4.6 4.3 4.3 4.4 5.1 2.5 2.9 4.1
- Effective interest rate (percent, selected): 2.0 1.3 1.7 1.9 1.9 1.8 1.8 1.7 1.7 2.4 2.9 1.8 2.0
- Growth of exports of G&S (US dollar terms, in percent, selected): 5.4 59.7 27.2 2.6 5.4 4.3 3.2 3.4 1.8 4.9 5.5 14.6 4.3
- Government revenues (excluding grants, in percent of GDP, selected): 8.7 11.1 15.3 13.7 15.2 15.9 16.3 16.7 17.4 19.7 22.2 11.3 17.2
- Aid flows (Million of US dollars, selected): 1,168.0 2,290.2 2,413.3 1,943.6 1,879.4 1,517.4 1,479.7 1,412.0 1,395.3 1,094.1 1,094.1
- Nominal GDP (Million of US dollars, selected): 48,707 57,407 65,808 68,632 75,370 83,024 91,115 100,379 110,240 178,623 402,696

### Public sector debt DSA highlights (2020-43, values preserved)
- Public sector debt (percent of GDP, selected): 25.3 24.0 22.0 21.5 20.4 19.3 18.0 16.5 15.1 10.4 8.6 15.6 15.5
- Of which: external debt (percent of GDP, selected): 16.8 16.8 15.5 17.2 17.2 16.4 15.5 14.3 13.4 9.3 5.5 9.1 13.4
- Change in public sector debt (selected): 5.9 -1.3 -2.0 -0.5 -1.1 -1.1 -1.3 -1.5 -1.4 -0.4 0.8
- Identified debt-creating flows (selected): 4.2 -3.6 -2.4 -1.2 -0.4 -0.6 -1.0 -1.2 -1.2 -0.6 0.6 -1.0 -0.9
- Primary deficit (selected, percent of GDP): 3.0 1.3 0.2 1.1 0.8 1.2 0.7 0.6 0.4 0.5 1.1 0.4 0.6
- Revenue and grants (percent of GDP, selected): 9.5 13.6 16.6 14.8 16.5 16.8 17.1 18.0 19.9 22.3 13.3 17.8
- PV of public debt-to-GDP ratio (selected): 18.5 16.9 15.4 14.2 12.9 11.5 10.3 6.9 6.6
- Debt service-to-revenue and grants ratio (selected): 11.0 11.9 16.3 17.7 11.6 8.8 9.9 10.8 10.4 6.2 7.2
- Gross financing need (selected): 4.1 2.9 2.9 3.7 2.8 2.6 2.4 2.4 2.2 1.8 2.7

### Stress tests and sensitivity analyses (tables summarized)
- Tables provide sensitivity analysis for key indicators of PPG external debt and public debt for 2023-33 under:
  - Alternative scenarios (e.g., key variables at historical averages)
  - Bound tests (e.g., shocks to real GDP growth, primary balance, exports, other flows, depreciation, combinations)
  - Tailored tests (e.g., combined contingent liabilities, commodity price shocks, market financing; natural disaster marked as "n.a.")
- Benchmarks and thresholds are reported alongside projected indicator paths; specific cell values and breaches are presented in the tables and figures.

### Statement by the Democratic Republic of the Congo delegation (June 28, 2023) — selected points
- Delegation: Mr. Sylla, Executive Director; Mr. Matungulu, Alternate Executive Director; Ms. Nkusu, Senior Advisor to Executive Director.
- Acknowledgment of IMF engagement and ECF support contributing to sound economic policies and key structural reforms under the NSDP.
- Noted resilience of growth in 2022 (real GDP 8.9 percent) driven by mining (22.6 percent), offsetting weaker non-mining activity due to insecurity and external shocks.
- Recognized higher expenditures related to security, displaced persons, and election costs (December 2023) that put pressure on the budget, exchange rate, and inflation.

*Source: Democratic Republic of the Congo — IMF staff report excerpt (figures, tables, and statement as provided).*

### 13.1 percent year-on-year in December 2022 compared with a projection of 12.3 percent and trending up

### 13.1 percent year-on-year in December 2022 compared with a projection of 12.3 percent and trending up

### Recent macroeconomic developments and fiscal/financial outcomes
- Inflation: "13.1 percent year-on-year in December 2022 compared with a projection of 12.3 percent and trending up further to 16.9 percent in March 2023."
- Drivers of domestic prices:
  - Continued exchange rate depreciation in the face of insecurity-related spending pressures.
- Fiscal outcomes:
  - Despite higher exceptional expenditures, the fiscal deficit was contained within the program target but with a significant change in the composition of spending.
- External accounts and reserves:
  - Gross international reserves increased from US$2.9 billion at end-2021 to US$4.5 billion at end-2022 compared with a projection of US$4.2 billion.
  - Reserve coverage at end-2022: "7.9 weeks of imports" — lower than expected owing to a higher than projected imports bill.
  - The 2022 current account deficit was wider than projected.

### Program performance and conditionality
- Quantitative performance criteria (QPCs) and indicative targets (ITs):
  - "All end-December 2022 quantitative performance criteria (QPCs) were met but some indicative targets (ITs) have been missed."
  - Most QPCs met with large margins, including:
    - Ceilings on net central bank (Banque Centrale du Congo, BCC) credit to the government.
    - Change in net domestic assets of the BCC.
    - Ceiling on the contracting and guaranteeing of new external debt by the public sector.
    - Floor on domestic fiscal balance.
  - Missed end-2022 ITs:
    - Floor on social spending (target covers a narrowly defined set of spending under three health programs).
    - Ceiling on BCC deposits used as guarantees for central government loans (missed due to monitoring shortcomings and despite no new guarantees being granted).
  - Missed end-March 2023 ITs:
    - Domestic fiscal balance.
    - Fiscal revenues.
    - BCC net domestic assets.
    - BCC foreign exchange (FX) assets held with domestic correspondents.
- Structural benchmarks (SBs):
  - "All but one structural benchmarks (SB) were met."
  - Met: end-December 2022 SB on the completion of the audit certifying domestic arrears.
  - Adopted: decree on public investment management and decree defining the perimeter and structure of the Treasury Single Account (end-May 2023 SBs).
  - Not met: continuous SB on publication of mining contracts — additional agreements related to the contract with Ventora and the contract signed with Primera Gold were published but not within the timeline prescribed by the relevant law of the country’s Mining Code.

### Outlook and risks
- Growth and inflation projections:
  - 2023 real GDP growth revised upward to "6.8 percent" from "6.3 percent".
  - 2024 GDP growth projected to moderate to "4.7 percent".
  - Inflation expected to decelerate to "11.5 percent" at end-2023 and "7.1 percent" at end-2024.
  - Medium-term (beyond 2024): GDP growth projected to average "5.3 percent a year".
  - Long-run inflation target: contain inflation at "7 percent, the BCC’s inflation target."
- Current account and reserves projections:
  - Current account deficit projected at "5.5 percent of GDP in 2023 (5.3 percent in 2022)", narrowing to "3.9 percent of GDP in 2024".
  - Reserves import cover projected to reach "10 weeks" in 2023 and "10.2 weeks" in 2024.
  - Medium-term reserves accumulation: projected to reach "3 months of imports by 2028."
- Risks (tilted to the downside):
  - External: impacts of the ongoing war in Ukraine; abrupt slowdown in China; reduced prices or demand for Congo’s exports.
  - Internal: worsening security in the East; spending pressures related to forthcoming elections; tensions ahead of elections.
- Authorities’ stance:
  - Prepared to adjust economic policies if warranted under the ECF-supported program and ongoing dialogue with the Fund.
  - Taking steps to ensure peaceful and democratic elections.

### Policies and reforms for 2023 and beyond
- Fiscal policy stance:
  - Authorities determined to tighten fiscal policy to preserve fiscal and debt sustainability and macroeconomic stability, supported by tighter monetary policy.
- Revenue mobilization measures:
  - Focus on broadening the tax base.
  - Improving tax compliance.
  - Containing VAT exemptions except for exceptional circumstances (example given: exemption of some essential food products).
  - Overhauling exceptional tax regimes and all conventions, agreements, other provisions allowing tax exemptions, except those set out in the prevailing administrative codes.
- Expenditure-side measures and civil service reform:
  - Plan to contain wage bill growth while launching an ambitious civil service reform.
  - Inter-ministerial order requiring any salary increase to be approved jointly by the Ministers of Budget, Finance and Civil Service — due to be signed by July 2023.
  - Preparations for a medium-term civil service reform: overall wage policy strategy; cleanup of the civil service staff database to eliminate ghost employees; reorganization of social security coverage of public officials and employees; financially sustainable pension system.
- Public financial management and transparency reforms:
  - Accelerate digitalization of revenue collection.
  - Introduce the Treasury Single Account; improve cash management; reduce cash payments in line with the new AML/CFT of December 2022.
  - Reform the fuel subsidy system; improve quality of spending; strengthen control of fiscal risks from public debt and public enterprises.
  - Continue reforms of public investment management based on the 2022 PIMA recommendations.
  - Strengthen management of the Bureau Central de Coordination (BCeCo) and closely monitor PDL-145T implementation.
- PDL-145T (Local Development Program of the 145 Territories):
  - Partially funded with half of the resources from the 2021 SDR allocation (equivalent to about US$714 million).
  - US$511 million allocated in 2022 for building schools, health centers, and administrative facilities — financial and physical execution has recently picked up after a slow start.
  - Remainder US$203 million allocated to rural electrification projects in 2023.
- Monetary and financial sector policy:
  - BCC to continue monitoring liquidity and ensure price stability while pursuing reserve accumulation.
  - Monetary tightening at Monetary Policy Committee meeting on June 19, 2023:
    - Policy rate raised by "200 basis points to 11 percent".
    - Required reserve ratio on deposits in Congolese francs raised from zero to "10 percent".
  - BCC will finish implementing the Forecasting and Policy Analysis System (FPAS) by 2024 with IMF technical assistance and operationalize it to strengthen monetary policy-making.
  - Continue operational and governance reforms at the BCC, notably implementing the 2020 Safeguards recommendations.
  - Implement recommendations of the Financial Sector Stability Review (FSSR) to strengthen surveillance and regulation.
- Exchange rate policy:
  - Remain flexible; BCC will limit interventions to smoothing excessive exchange rate volatility and to accumulate FX reserves as needed.
- Governance, structural reforms, and climate:
  - Priorities: improving education and health systems; liberalizing telecommunications; revising the Investment Code and the Agricultural Law; enhancing governance and fight against corruption; implementing the financial inclusion strategy; developing basic infrastructure (transport, communications, energy, safe drinking water).
  - Climate commitments:
    - National Adaptation Plan to Climate Change (NAP) developed and vetted by stakeholders.
    - NAP spans adaptation (water resources, forestry, agriculture), mitigation, and transition.
    - C-PIMA climate diagnostics and forthcoming CCDR complement NAP.
    - DRC’s rainforest role: "second largest rainforest in the world that absorbs as much as four percent of global carbon emissions every year."
    - Authorities plan to submit a formal request for IMF assistance under the Resilience and Sustainability Trust (RST) in due course.
- AML/CFT reforms:
  - Commit to addressing FATF-identified deficiencies that led to inclusion on the list of jurisdictions under enhanced scrutiny.
  - Implement the FATF-backed action plan, building on the December 2022 AML/CFT law and the April 2023 ML/FT National Risk Assessment (NRA).
  - Government approved creation of a taskforce on June 17 (high-level committee headed by the Prime Minister, an inter-institutional committee, and a technical secretariat) to drive reforms and support implementation by CENAREF.

### Conclusion and requests
- Program assessment:
  - Authorities have demonstrated strong commitment to the economic and financial program despite insecurity and global uncertainty.
  - "Program performance over the period under review has been satisfactory and the authorities have reaffirmed their commitment to the ECF-supported program."
- Requests to the Fund:
  - Authorities are requesting the modification of the end-June 2023 net international reserves QPC and the completion of the fourth review under the ECF arrangement.
  - IMF staff request: "We would greatly appreciate Directors’ favorable consideration of these requests."

*Source: IMF staff report chapter/section (PDF chapter/section provided).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1codea2023002.pdf_