## _cr05391

## Source details

**Canonical URL:** [_cr05391](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr05391.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr05391.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr05391.pdf.json)

---

### Introduction and purpose
- Preliminary assessment of the eligibility of the Republic of Congo (Congo) for assistance under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
- Findings based on several joint IDA-IMF missions to Brazzaville, most recently in May 2005.
- Preliminary debt sustainability analysis (DSA) indicates Congo’s external debt burden would remain above the HIPC threshold even after traditional debt-relief mechanisms, with a ratio of net present value of debt to government fiscal revenues well above the threshold of 250 percent on the basis of end-2003 data.
- Debt relief under the enhanced HIPC Initiative is expected to help accelerate progress toward meeting the Millennium Development Goals (MDGs), subject to addressing capacity constraints to enable absorption of related resources.

### Eligibility for HIPC Initiative assistance: PRGF and IDA status
- Congo is an IDA-only country, with a GNI per capita of US$770 in 2004 (World Bank Atlas methodology).
- IMF Executive Board approved a three-year arrangement under the PRGF for Congo on December 6, 2004 equivalent to SDR 54.99 million (65 percent of quota).
- Congo is likely to remain an IDA-only country and eligible for PRGF resources for the foreseeable future.

### Selected poverty and living standard indicators
- Population (in millions, 2004): Republic of Congo 3.8; Sub-Saharan Africa 688
- Population growth (in percent): Republic of Congo 3.0; Sub-Saharan Africa 2.4
- GNI per capita (U.S. dollars, 2004): Republic of Congo 770; Sub-Saharan Africa 450
- Life expectancy (years): Republic of Congo 52; Sub-Saharan Africa 46
- Infant mortality rate (per thousand): Republic of Congo 81; Sub-Saharan Africa 105
- Child under 5 mortality rate (per thousand, 2003): Republic of Congo 108; Sub-Saharan Africa ...
- Maternal mortality rate (per 100,000 live births): Republic of Congo 510; Sub-Saharan Africa ...
- Adults and children living with HIV/AIDS (excludes orphans, 2001): Republic of Congo 110,000; Sub-Saharan Africa ...
  - Of which, children aged 0-14: Republic of Congo 15,000; Sub-Saharan Africa ...
  - Of which, adults aged 15-49: Republic of Congo 99,000; Sub-Saharan Africa ...
  - Of which, women aged 15-49: Republic of Congo 59,000; Sub-Saharan Africa ...
- Orphans, aged 0-14, living with HIV/AIDS (2001): Republic of Congo 78,000; Sub-Saharan Africa ...
- Illiteracy rate (percent of population age 15+, latest single year available 1996-2002): Republic of Congo 17; Sub-Saharan Africa 37
- Gross primary enrollment rate (percent of school age population, latest single year available 1996-2002): Republic of Congo 97; Sub-Saharan Africa 86
  - Male: Republic of Congo 101; Sub-Saharan Africa 92
  - Female: Republic of Congo 93; Sub-Saharan Africa 80
- Impact of conflicts in the 1990s:
  - Child soldiers: 5,000
  - Displaced persons: 1,000,000
- Source for Box 1: World Bank, Economic and Social Indicators.

### Poverty, social development, and human capital
- Per capita real GDP in 2003 was about 70 percent of its level in 1984.
- Estimated that 70 percent of the population lives below the poverty line (defined as US$1 per day) compared to about 30 percent in 1993.
- 2004 United Nations human development index ranked Congo 144th out of 177 countries.
- Unemployment affects more than 50 percent of the active population.
- Education: government prepared an “Education for All Action Plan” focusing on decentralization, partnerships with civil society, and improvements in quality, efficiency, and transparency.
- Health: two major problems—poor infrastructure (over half of health facilities destroyed or damaged during conflicts) and lack of qualified personnel; government adopted a three-year plan to prevent STD/HIV transmission, care for the sick, decentralize activities, train personnel, and carry out research.

### Selected economic and social performance (1980–2004)
- Per capita GDP (in 1995 US dollars): 1980-84 982; 1985-89 979; 1990-94 883; 1995-99 796; 2000-04 795
- Real GDP growth: 1980-84 14.3; 1985-89 -0.7; 1990-94 -0.1; 1995-99 1.7; 2000-04 4.2
- Oil sector growth (percent): 1980-84 12.5; 1985-89 9.3; 1990-94 3.8; 1995-99 9.1; 2000-04 -3.3
- Nonoil sector growth (percent): 1980-84 14.9; 1985-89 -3.3; 1990-94 -1.7; 1995-99 -2.8; 2000-04 9.6
- Consumer price inflation (percent): 1980-84 3.7; 1985-89 -2.8; 1990-94 9.0; 1995-99 7.4; 2000-04 1.9
- Fiscal accounts (in percent of GDP):
  - Total domestic revenue (excl. grants): 1980-84 34.1; 1985-89 25.8; 1990-94 24.3; 1995-99 25.7; 2000-04 29.1
  - Primary expenditure and net lending 1/: 1980-84 24.3; 1985-89 22.9; 1990-94 26.4; 1995-99 21.6; 2000-04 22.4
  - Basic primary budget balance: 1980-84 9.8; 1985-89 2.9; 1990-94 -2.2; 1995-99 4.2; 2000-04 6.7
- External sector:
  - Trade balance (percent of GDP): 1980-84 23.3; 1985-89 25.6; 1990-94 24.3; 1995-99 40.1; 2000-04 53.3
  - External debt (percent of GDP): 1980-84 89.6; 1985-89 176.6; 1990-94 217.5; 1995-99 236.9; 2000-04 180.8
- Real effective exchange rate (index, 1990=100): 1980-84 96.7; 1985-89 98.8; 1990-94 92.7; 1995-99 79.3; 2000-04 80.8
- Terms of trade (index, 1990=100): 1980-84 179.6; 1985-89 125.8; 1990-94 84.1; 1995-99 78.0; 2000-04 127.4
- Oil price (U.S. dollars per barrel): 1980-84 33.3; 1985-89 18.7; 1990-94 19.2; 1995-99 17.4; 2000-04 28.9
- Social indicators:
  - Adult illiteracy ratio (percent ages 15+): 1980-84 46; 1985-89 38; 1990-94 30; 1995-99 23; 2000-04 19
  - Secondary school enrollment ratio 2/: 1980-84 74; 1985-89 75; 1990-94 54; 1995-99 53; 2000-04 42
  - Immunization ratio 3/ (percent of children under 12 months for DTP): 1980-84 50; 1985-89 70; 1990-94 67; 1995-99 33; 2000-04 31
  - Life expectancy at birth (years): 1980-84 50; 1985-89 51; 1990-94 51; 1995-99 51; 2000-04 51
- Notes:
  - 1/ Noninterest current expenditure plus domestically-financed investment.
  - 2/ In percent of the children of secondary school age.
  - 3/ In percent of children under 12 months for immunization against diphtheria, tetanus, and polio.

### Conflict impacts and urban conditions
- Successive civil wars (1993, 1997, and 1998–99) caused extensive loss of human lives and negative socio-economic consequences.
- Congo is highly urbanized: roughly 70 percent of the population resides in urban areas.
- Urban conditions: inner-city neighborhoods sparsely populated with functioning infrastructure vs. peripheral neighborhoods densely populated and lacking basic socio-economic amenities.
- Government I-PRSP urban strategy includes updating urban development policies; rehabilitating urban road network and linking roads in dense neighborhoods; adopting urban environmental management strategy; supporting small-scale urban enterprises; improving urban governance and local tax collection.

### Policy track record, reforms, and governance measures
- Progress since conflict but large challenges remain: widespread primarily urban poverty, demobilization, transparency in natural resource management.
- External support and programs:
  - IMF Emergency Post Conflict Assistance SDR 10.6 million in 2000.
  - Four staff-monitored programs (SMP) during 2001-04.
  - New three-year PRGF arrangement approved December 2004 to support program through 2007.
  - IDA support: Post Conflict Economic Recovery Credit US$37.6 million in July 2001; Economic Recovery Credit US$30 million in December 2004.
  - Agreement on December 16, 2004 between Paris Club creditors and Congo for debt stock reduction and arrears rescheduling.
- Governance and transparency measures since late 2003:
  - Tighter control of expenditure, high oil revenues, mobilization of nonoil revenues.
  - Centralization of a large portion of fiscal revenues and expenditures in the budget.
  - New senior officials in revenue administrations and Office of Inspector-General of Finance.
  - Improved tracking of oil revenues and budgetary expenditures.
  - Emphasis on oil sector and natural resource transparency, including internet publication of quarterly oil revenue certification reports, full 2003 audit report of SNPC, terms and conditions of SNPC financial transactions for the government, and all active production-sharing agreements.
  - Authorities announced commitment to adhere to the Extractive Industry Transparency Initiative (EITI).
  - No new loans with maturity exceeding one year using oil as collateral contracted since October 2002.

### Medium-to-long-term macroeconomic framework and projections (2005–23)
- Forecast assumptions: sound macroeconomic policies, increased investment in infrastructure and human capital, structural reforms, improved transparency, governance, and rule of law.
- Baseline scenario assumes traditional debt relief mechanisms with significant downward impact on debt service.
- Growth projections and sectoral outlook:
  - Real GDP growth projected at about 4.7 percent per year during 2005-23.
  - Nonoil sector share projected to rise from about 50 percent in 2004 to some 80 percent by 2023.
  - Oil production expected to increase until 2010 as new fields come on stream, then decline over the following two years.
  - Oil-sector real GDP projected to grow by about 1 percent per annum over 2005-23.
  - Nonoil real GDP growth projected to accelerate steadily, driven by higher investment and structural reforms.
- Poverty reduction comment: Projected economic growth is below that needed to halve the proportion of the population living below the poverty line (i.e., about 8 percent per annum in the nonoil sector), but is considered realistic and likely to be achievable and sustainable.

### Fiscal revenues: projections, composition, and rules
- Fiscal revenues (including oil and nonoil) projected at about 27½ percent of GDP per year on average during 2005-23, compared to 29 percent on average over 2000-04.
- Nonoil revenues projected to rise to about 16½ percent of GDP by 2023 (from around 9 percent in 2004).
- Oil revenues projected to be lower by almost 6 percentage points of GDP per year on average during 2005-23 (relative to 2000-04).
- Measures to enhance nonoil revenues and compliance:
  - Systematic transfer of revenues to the Treasury.
  - Widening territorial coverage of tax and customs administrations.
  - Improvement in computer linkages at the customs office in Pointe Noire.
  - Reinforcement of customs and tax administrations.
  - Strengthening management of the value-added tax.
  - Medium-to-long-term: regular tax audits; computerized links between customs/tax offices; use of the single taxpayer identification number; elimination of discretionary tax exemptions.
- Public expenditure composition and tracking:
  - Share of pro-poor spending expected to increase in line with I-PRSP.
  - Authorities plan to strengthen tracking from commitment to payment stage and complete introduction of functional and economic budget classification (with IMF/World Bank technical assistance).
  - Plan to improve tracking of poverty-related expenditures (with World Bank assistance) and review public procurement system.
- Fiscal balance and conservative rule:
  - Overall budget balance projected to remain positive throughout the forecast period but decline significantly from 2012 onward reflecting a projected decline in oil revenues.
  - Conservative fiscal rule: oil revenues (and expenditures) should be projected on the basis of conservative oil projections (IMF, WEO projected price minus US$4 per barrel).

### Growth accounting for non-oil GDP (method and findings)
- Production function: Y = A L^0.6 K^0.4, where Y is non-oil real GDP; A is TFP; L is labor force; K is physical capital in the non-oil sector.
- Caveat: capital stock series constructed using simplifying assumptions and may contain significant errors.
- Summary findings:
  - Factor accumulation explained the bulk of non-oil output growth during 1970–2004, with TFP playing a limited role.
  - Civil wars of the 1990s led to sharp deceleration of factor accumulation and a negative Solow residual.
  - Post-war pickup in non-oil output accompanied by a significant catch-up in productivity.
  - Growth forecast for 2005-23 predicated on greater factor accumulation and a slightly larger Solow residual.
  - Investment expected to be larger by about 6 percentage points of GDP per year on average between 2000-04 and 2005-23.
  - Faster productivity growth expected mainly from (i) secondary impact of increased investment in the oil sector, and (ii) pickup from structural reforms and infrastructure investments.
- Key growth-accounting figures (selected):
  - Non-oil real GDP growth (1970-79 / 1980-89 / 1990-99 / 2000-04 / 1970-89 / 2005-23 Proj.): 3.6 5.8 -2.3 9.6 4.7 6.0
  - Factor accumulation 1/: 3.6 3.5 1.9 5.1 3.6 4.8
  - Solow residual: 0.0 2.3 -4.2 4.5 1.1 1.2
  - Memorandum: Labor growth: 2.5 2.8 2.9 2.9 2.7 2.7; Capital stock growth: 5.2 4.5 -2.6 8.4 4.9 8.0
  - 1/ Accumulation of capital and labor, using 0.4 and 0.6 as factor shares, respectively.

### External sector, exports, financing needs, and internal arrears
- Export volume expected to grow by 3½ percent per year on average during 2005-23.
- Share of oil exports projected to decline from 65 percent of GDP in 2004 to less than 30 percent by 2023.
- Rescheduling of arrears to Paris Club creditors projected to raise debt service to about 8 percent of GDP a year on average over 2005-07.
- In 2005, financing is assured due to resources already committed by bilateral and multilateral donors and Paris Club assurances.
- Large external arrears to commercial creditors amount to some US$2.5 billion.
- Internal debt stock at about CFAF 560 billion at end-2003 (27 percent of GDP), with social debt (salary and pension arrears) amounting to about CFAF 240 billion.
- Authorities committed to preparing a comprehensive plan to settle domestic arrears and to publish the related policy framework on the internet.
- Government signed a “social truce” with labor unions and began gradual clearance of arrears on wages and pensions in 2004.

### Private sector development, agriculture, and structural reforms
- Private sector development seen as key to pro-poor growth.
- Measures and reforms:
  - One-stop tax window to streamline tax burden on enterprises.
  - Reform legal and judicial framework for business with World Bank assistance.
  - Consolidate privatization in refined petroleum products distribution, banking, and telecommunications.
  - Rehabilitate and upgrade water and electricity utilities with World Bank assistance.
  - Continue efforts to complete concession of the Pointe Noire–Brazzaville railways link.
  - Promote unrestricted public access to comprehensive tax and customs laws and regulations.
- Agriculture challenges and policy:
  - Production constraints: primitive technologies and limited research/extension support.
  - Marketing constraints: high market transaction costs due to inefficient rural transport infrastructure.
  - National agricultural policy adopted late 2003 with objectives to increase food security, reduce imports, revitalize exports, create rural jobs, reduce rural-urban migration, manage natural resources sustainably, and diversify growth sources.

### Debt sustainability analysis (DSA), structure, and magnitude (end-December 2003)
- DSA prepared jointly by authorities and IDA/IMF staff, based on loan-by-loan data as of end-December 2003.
- About 70 percent of external debt reconciled with creditors as of end-2003; reconciliation ongoing.
- Public and publicly guaranteed external debt estimated at US$8.5 billion in nominal terms, or US$8.4 billion in net present value (NPV) terms as of end-December 2003.
- NPV of debt corresponds to:
  - 806 percent of fiscal revenue,
  - 338 percent of exports,
  - 235 percent of GDP as of end-2003.
- Composition:
  - Multilateral and official bilateral creditors account for about two thirds of total stock.
  - Multilateral debt represents about 8 percent of total stock.
  - Official bilateral debt accounts for 59 percent (bulk owed to Paris Club creditors).
  - Commercial debt represents 33 percent of total stock; about two thirds of this (21 percent of total stock) owed to London Club creditors.
  - Oil-collateralized loans account for 5½ percent of total stock.
  - Some debt under litigation; court-awarded claims could be much larger than face value.
  - Very low grant element: nominal debt close to its NPV, especially for bilateral official and commercial debt.
- Table excerpt (Net Present Value of External Debt, end-2003):
  - Total 1/: 8,385 (Million U.S. dollars) — 100 percent
  - Multilateral: 558 — 7 percent
  - Official bilateral: 4,982 — 59 percent
    - Paris Club: 4,675 — 56 percent
    - Other: 307 — 4 percent
  - Commercial: 2,845 — 34 percent
  - Memorandum items:
    - Oil-collateralized debt: 481 — 6 percent
    - NPV of debt after traditional relief 2/: 4,920 ...
    - In percent of government revenue: 473 ...
    - In percent of exports: 197 ...
  - 1/ Excluding potential debt of the SNPC.
  - 2/ Results of preliminary assessment under Naples terms.

### Paris Club rescheduling and preliminary effects
- December 2004 Paris Club debt restructuring under Naples terms.
- After simulating this treatment for bilateral and commercial debt, and excluding clearance of multilateral arrears, the stock of external debt outstanding in NPV terms is US$5 billion as of end-2003.
- Decline in NPV from concessional rescheduling by multilaterals will be counted towards their contribution to debt reduction under the enhanced HIPC Initiative.

### Possible enhanced HIPC Initiative assistance: scale, contributors, and timing
- Debt relief under enhanced HIPC Initiative would reduce Congo’s external debt by nearly one half.
- To bring external debt-to-fiscal revenues ratio down from 473 percent at end-2003 to target ratio of 250 percent implies:
  - a common reduction factor of 47.1 percent for all creditors;
  - relief of US$2,319 million in NPV terms.
- Expected creditor contributions (NPV terms):
  - Multilateral creditors: about US$265 million;
  - Paris Club bilateral creditors: about US$1,265 million;
  - Commercial creditors: about US$684 million;
  - Other official bilateral creditors: US$105 million.
- Translating into debt-service relief over time: about US$4,220 million.
- Assumptions for modalities and timing:
  - Paris Club bilateral creditors: flow rescheduling on Cologne terms—i.e., a 90 percent NPV reduction—after Decision Point, with remaining assistance at Completion Point via stock-of-debt operation.
  - Comparable treatment by non-Paris Club official bilateral creditors and commercial creditors.
  - IMF assistance: total US$12.6 million in NPV terms; interim assistance immediately following Decision Point covering 2005-07 obligations; principal repayments on IMF PRGF loans begin August 2009; most IMF relief delivered following Completion Point.
  - IDA assistance: total US$67.7 million in NPV terms; begin debt service relief immediately following Decision Point and continue until 2025, assuming Completion Point at end-2007.
  - Other creditors assumed to provide debt-service reduction from Decision Point or Completion Point until contributions meet enhanced HIPC requirements.

### HIPC fiscal window eligibility and projected post-HIPC debt dynamics
- Fiscal-window eligibility criteria (April 1997): export-to-GDP ratio of at least 30 percent, and fiscal revenues-to-GDP ratio of at least 15 percent (average of last three years).
- Congo’s ratios as of 2003:
  - exports-to-GDP ratio: about 79 percent
  - fiscal revenues-to-GDP ratio: about 29 percent
- NPV of external debt-to-fiscal revenues (including new borrowing) projections after HIPC:
  - 247 percent at end-2003
  - 169 percent in 2004 (after phased-in full delivery of HIPC assistance)
  - Remains below the HIPC threshold of 250 percent over the projection period
  - Reaches 60 percent by the end of the projection period
- External debt service-to-fiscal revenues:
  - 56.1 percent in 2005
  - Remains elevated until end-2007
  - Falls sharply after 2007 and remains below 10 percent thereafter
  - From 2010 to end of projection period, debt service burden at or below average burden in other decision point HIPCs

### Sensitivity analysis: shock scenarios and vulnerability
- Oil price shock scenario:
  - Oil prices fall by 25 percent throughout the forecast period relative to baseline.
  - Result: ratio of the NPV of external debt-to-fiscal revenues is on average higher by about 22 percentage points per year over 2004-13 relative to baseline.
- Non-oil growth shock scenario:
  - Two-percentage point lower non-oil GDP growth throughout projection period.
  - Result: NPV of external debt-to-fiscal revenues over 2014-23 is higher by about 8 percentage points per year relative to baseline.
- Conclusion: Congo remains vulnerable to adverse external and domestic shocks despite HIPC assistance.

### PRSP process, Decision Point timing, and Completion Point triggers
- I-PRSP and poverty assessment:
  - I-PRSP estimates that 50 percent of the population are poor; contrasts with World Bank’s 1996 estimate of 70 percent.
  - Full PRSP development planned for 2005, expected ready in late 2006.
- Recommended Decision Point timing:
  - Staffs recommend Decision Point be considered by Boards by late 2005 on a stand-alone basis before completion of the second PRGF review envisaged for February 2006.
- Possible Completion Point timing:
  - If on track with PRSP implementation and reforms, Completion Point could be reached in the second half of 2007 or the first half of 2008.
- Possible Completion Point triggers (summary):
  - PRSP preparation and at least one year satisfactory implementation with Annual Progress Report and Joint Staff Advisory Note.
  - Maintenance of macroeconomic stability under PRGF-supported program.
  - Public spending alignment with I-PRSP priorities.
  - Public finance management reforms: functional/economic budget classification; public procurement reform and implementing decrees.
  - Natural resource management: transparency and governance measures in oil and forestry sectors.
  - Structural reforms: legal/regulatory framework for public enterprise reform and privatization; anti-corruption measures.
  - Social development measures: improvements in health and education access/quality; HIV/AIDS prevention and care; monitorable improvements in water, sanitation, electricity, and roads.
  - External debt management: quarterly validation and publication of external debt data; centralization of oil-related debt information at CCA.

### Monitoring, use of HIPC resources, and expenditure priorities
- Key requirements for effective use of debt relief:
  - Strengthen programming, management, and control of expenditure and improve service delivery.
  - IDA and IMF technical assistance in public expenditure management essential.
- Public Expenditure Review (PER):
  - First PER conducted in 2004; component to identify core poverty-reduction spending priorities in line with I-PRSP.
  - PER final report expected September 2005.
- Institutional arrangements and safeguards:
  - Poverty reduction programs to follow standard budget procedures; eligibility for HIPC funding subject to non-objection of monitoring committee.
  - Local community participation in defining priorities and monitoring service delivery.
  - Use of HIPC resources subject to independent technical and financial audits; audits to be publicly available.
- Interim assistance timing:
  - If Decision Point reached late 2005, interim assistance-financed poverty programs would need inclusion in 2006 government budget.
  - HIPC financing likely to focus on priority areas summarized below.
- Possible expenditure priorities (Box 6):
  - Governance: improve citizen access to information; finance results-based monitoring and evaluation; reform judicial system.
  - Social Protection: resettle and reintegrate ex-combatants; reintegrate civil strife victims; social safety nets linked to employment creation, especially for youth.
  - Infrastructure/Urban: rehabilitate roads (particularly rural access roads); rehabilitate/expand water supply systems; rehabilitate power grids.
  - Health: control spread of HIV/AIDS; promote immunization, good hygiene, oral hydration salts, good nutrition, bed nets, condoms; rehabilitate health infrastructure; develop human resources; strengthen pharmaceutical sector.
  - Education: raise share of expenditures on education; hire additional primary teaching staff.
  - Rural: improve access to rural financial services; improve rural roads; improve policy formulation capacity in Ministry of Agriculture.

### Debt tables, projected indicators, and HIPC delivery mechanics (selected figures)
- Table highlights (selected series):
  - Before traditional debt-relief: NPV of total debt: 8,385 (2003).
  - After traditional debt-relief: NPV of total debt: 4,920 (2003).
  - After enhanced HIPC assistance (conditional delivery): NPV of total debt: 8,242 (2003); 5,211 (2004); 4,504 (2005); 4,103 (2006); 1,076 (2007).
  - After full delivery (end-2003 hypothetical full delivery): NPV of total debt: 2,572 (2003).
- Table 7 (after traditional debt relief mechanisms):
  - NPV of debt-to-GDP ratio: 138 (2003).
  - NPV of debt-to-exports ratio: 197 (2003).
  - NPV of debt-to-revenue ratio: 473 (2003).
- Table 5 (burden-sharing):
  - Common reduction factor: 47.1 percent.
  - Central government revenues (excludes grants) comparator: 1,040.
- World Bank and IMF delivery examples:
  - World Bank Group HIPC assistance: enhanced HIPC assistance of $68 million in end-2003 NPV terms proposed to be delivered over about 21 years through a 63 percent relief on debt service due to IDA corresponding to a nominal relief of $114 million.
  - IMF assistance: Total IMF assistance under enhanced HIPC Initiative is US$ 12.48 million in NPV terms (table details delivery schedule and coverage of IMF obligations).

### SNPC, public enterprise external debt, and debt management capacity
- SNPC (Société Nationale des Petroles du Congo) excluded from DSA per authorities’ methodology, but described in detail:
  - Assets at end-2003 estimated at US$1.2 billion.
  - Overdraft debt totaled US$954 million at end-2003 arising from “advance accounts” (carried interest).
  - Outstanding questions:
    - Whether overdraft balances constitute debt given reimbursement contingent on oil income.
    - Legal residency of creditors to classify external vs. domestic debt.
    - Need for reconciliation with creditors and debt service profiling if considered external.
  - Staff preliminary view: unclear whether overdrafts are debt; examination ongoing with aim for a definitive answer by Decision Point.
  - Of the eight creditors at end-2003, two appear to be Congolese resident companies; if confirmed, potential external debt reducible from US$954 million to US$489 million.
  - External audit report summaries:
    - “Loans and various financial debts”: US$235 million.
    - “Other debts” linked to government transactions: US$357 million.
    - Total listed: US$615 million, of which about US$380 million are oil-collateralized loans already captured in DSA.
- Debt management capacity:
  - Caisse Congolaise d’Amortissement (CCA) is sole agency responsible for debt statistics and management.
  - Gaps: computer systems not fully linked; only one computer has debt software; data entry manual elsewhere; detailed SOE debt not included; limited tracking of commercial debt under litigation and secondary-market debt purchasers.
  - Improvements underway: installation of UNCTAD’s DMFAS version 5.3 and identified staff training needs in legal aspects of debt negotiation, macroeconomic analysis related to debt sustainability, and computer software utilization.
  - Recommendation: centralized debt information at CCA, continuous staff training, and regular public data dissemination.

### Issues for Executive Directors and operational questions
- Executive Directors asked for views on:
  - Eligibility: whether Congo is likely to meet fiscal-window criteria of enhanced HIPC Initiative.
  - Timing of Decision Point: whether Congo could reach Decision Point by late 2005 (before completion of second PRGF review), conditional on macro program performance, Completion Point trigger understandings, and debt reconciliation progress (including SNPC obligations).
  - Floating Completion Point: views on possible triggers and key policy measures.
  - Commercial creditors: handling litigation and large commercial creditor exposure (about one-third of outstanding debt), which could complicate HIPC process.

*Source: IMF-World Bank staff joint assessment as presented in the document.*

### 1. Selected Poverty and Living Standard Indicators .............................................................5

### 1. Selected Poverty and Living Standard Indicators .............................................................5

### Introduction and purpose
- Preliminary assessment of the eligibility of the Republic of Congo (Congo) for assistance under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
- Findings based on several joint IDA-IMF missions to Brazzaville, most recently in May 2005.
- Preliminary debt sustainability analysis (DSA) indicates Congo’s external debt burden would remain above the HIPC threshold even after traditional debt-relief mechanisms, with a ratio of net present value of debt to government fiscal revenues well above the threshold of 250 percent on the basis of end-2003 data.
- Debt relief under the enhanced HIPC Initiative is expected to help accelerate progress toward meeting the Millennium Development Goals (MDGs), subject to addressing capacity constraints to enable absorption of related resources.

### Eligibility for HIPC Initiative assistance: PRGF and IDA status
- Congo is an IDA-only country, with a GNI per capita of US$770 in 2004 (World Bank Atlas methodology).
- IMF Executive Board approved a three-year arrangement under the PRGF for Congo on December 6, 2004 equivalent to SDR 54.99 million (65 percent of quota).
- Congo is likely to remain an IDA-only country and eligible for PRGF resources for the foreseeable future.

### Selected poverty and living standard indicators (Box 1)
- Population (in millions, 2004): Republic of Congo 3.8; Sub-Saharan Africa 688
- Population growth (in percent): Republic of Congo 3.0; Sub-Saharan Africa 2.4
- GNI per capita (U.S. dollars, 2004): Republic of Congo 770; Sub-Saharan Africa 450
- Life expectancy (years): Republic of Congo 52; Sub-Saharan Africa 46
- Infant mortality rate (per thousand): Republic of Congo 81; Sub-Saharan Africa 105
- Child under 5 mortality rate (per thousand, 2003): Republic of Congo 108; Sub-Saharan Africa ...
- Maternal mortality rate (per 100,000 live births): Republic of Congo 510; Sub-Saharan Africa ...
- Adults and children living with HIV/AIDS (excludes orphans, 2001): Republic of Congo 110,000; Sub-Saharan Africa ...
  - Of which, children aged 0-14: Republic of Congo 15,000; Sub-Saharan Africa ...
  - Of which, adults aged 15-49: Republic of Congo 99,000; Sub-Saharan Africa ...
  - Of which, women aged 15-49: Republic of Congo 59,000; Sub-Saharan Africa ...
- Orphans, aged 0-14, living with HIV/AIDS (2001): Republic of Congo 78,000; Sub-Saharan Africa ...
- Illiteracy rate (percent of population age 15+, latest single year available 1996-2002): Republic of Congo 17; Sub-Saharan Africa 37
- Gross primary enrollment rate (percent of school age population, latest single year available 1996-2002): Republic of Congo 97; Sub-Saharan Africa 86
  - Male: Republic of Congo 101; Sub-Saharan Africa 92
  - Female: Republic of Congo 93; Sub-Saharan Africa 80
- Impact of conflicts in the 1990s:
  - Child soldiers: 5,000
  - Displaced persons: 1,000,000
- Source for Box 1: World Bank, Economic and Social Indicators.

### Poverty, social development, and human capital
- Per capita real GDP in 2003 was about 70 percent of its level in 1984, reflecting a long decline in per capita income from the mid-1980s to the late-1990s.
- Estimated that 70 percent of the population lives below the poverty line (defined as US$1 per day) compared to about 30 percent in 1993.
- 2004 United Nations human development index ranked Congo 144th out of 177 countries.
- Unemployment affects more than 50 percent of the active population, with youth particularly affected.
- Education: government prepared an “Education for All Action Plan” focusing on decentralization, partnerships with civil society, and improvements in quality, efficiency, and transparency.
- Health: two major problems—poor infrastructure (over half of health facilities destroyed or damaged during conflicts) and lack of qualified personnel; government adopted a three-year plan to prevent STD/HIV transmission, care for the sick, decentralize activities, train personnel, and carry out research. Ministry of Education engaged in HIV/AIDS education.

### Selected economic and social performance (Box 2, 1980-2004)
- Per capita GDP (in 1995 US dollars): 1980-84 982; 1985-89 979; 1990-94 883; 1995-99 796; 2000-04 795
- Real GDP growth: 1980-84 14.3; 1985-89 -0.7; 1990-94 -0.1; 1995-99 1.7; 2000-04 4.2
- Oil sector growth (percent): 1980-84 12.5; 1985-89 9.3; 1990-94 3.8; 1995-99 9.1; 2000-04 -3.3
- Nonoil sector growth (percent): 1980-84 14.9; 1985-89 -3.3; 1990-94 -1.7; 1995-99 -2.8; 2000-04 9.6
- Consumer price inflation (percent): 1980-84 3.7; 1985-89 -2.8; 1990-94 9.0; 1995-99 7.4; 2000-04 1.9
- Fiscal accounts (in percent of GDP):
  - Total domestic revenue (excl. grants): 1980-84 34.1; 1985-89 25.8; 1990-94 24.3; 1995-99 25.7; 2000-04 29.1
  - Primary expenditure and net lending 1/: 1980-84 24.3; 1985-89 22.9; 1990-94 26.4; 1995-99 21.6; 2000-04 22.4
  - Basic primary budget balance: 1980-84 9.8; 1985-89 2.9; 1990-94 -2.2; 1995-99 4.2; 2000-04 6.7
- External sector:
  - Trade balance (percent of GDP): 1980-84 23.3; 1985-89 25.6; 1990-94 24.3; 1995-99 40.1; 2000-04 53.3
  - External debt (percent of GDP): 1980-84 89.6; 1985-89 176.6; 1990-94 217.5; 1995-99 236.9; 2000-04 180.8
- Real effective exchange rate (index, 1990=100): 1980-84 96.7; 1985-89 98.8; 1990-94 92.7; 1995-99 79.3; 2000-04 80.8
- Terms of trade (index, 1990=100): 1980-84 179.6; 1985-89 125.8; 1990-94 84.1; 1995-99 78.0; 2000-04 127.4
- Oil price (U.S. dollars per barrel): 1980-84 33.3; 1985-89 18.7; 1990-94 19.2; 1995-99 17.4; 2000-04 28.9
- Social indicators:
  - Adult illiteracy ratio (percent ages 15+): 1980-84 46; 1985-89 38; 1990-94 30; 1995-99 23; 2000-04 19
  - Secondary school enrollment ratio 2/: 1980-84 74; 1985-89 75; 1990-94 54; 1995-99 53; 2000-04 42
  - Immunization ratio 3/ (percent of children under 12 months for DTP): 1980-84 50; 1985-89 70; 1990-94 67; 1995-99 33; 2000-04 31
  - Life expectancy at birth (years): 1980-84 50; 1985-89 51; 1990-94 51; 1995-99 51; 2000-04 51
- Sources: Congolese authorities, and staff estimates and calculations.
- Notes:
  - 1/ Noninterest current expenditure plus domestically-financed investment.
  - 2/ In percent of the children of secondary school age.
  - 3/ In percent of children under 12 months for immunization against diphtheria, tetanus, and polio.

### Conflict impacts and urban conditions
- Successive civil wars (1993, 1997, and 1998–99) caused extensive loss of human lives and negative socio-economic consequences.
- Congo is highly urbanized: roughly 70 percent of the population resides in urban areas.
- Urban conditions: inner-city neighborhoods sparsely populated with functioning infrastructure vs. peripheral neighborhoods densely populated and lacking basic socio-economic amenities.
- Government I-PRSP urban strategy includes updating urban development policies; rehabilitating urban road network and linking roads in dense neighborhoods; adopting urban environmental management strategy; supporting small-scale urban enterprises; improving urban governance and local tax collection.

### Policy track record and reforms
- Emerging from conflict, Congo has made significant progress on financial and structural reforms but large challenges remain (widespread primarily urban poverty, demobilization, transparency in natural resource management).
- Political/security improvements since 2002 aided reform implementation; cabinet reshuffle in early January 2005 noted; rebel attacks in 2005 show fragility.
- External support and programs:
  - IMF Emergency Post Conflict Assistance SDR 10.6 million in 2000.
  - Four staff-monitored programs (SMP) during 2001-04.
  - New three-year PRGF arrangement approved December 2004 to support program through 2007.
  - IDA support: Post Conflict Economic Recovery Credit US$37.6 million in July 2001; Economic Recovery Credit US$30 million in December 2004. Ongoing IDA investment projects listed by the authorities.
  - Agreement on December 16, 2004 between Paris Club creditors and Congo for debt stock reduction and arrears rescheduling.
- Governance and transparency measures since late 2003:
  - Tighter control of expenditure, high oil revenues, mobilization of nonoil revenues.
  - Centralization of a large portion of fiscal revenues and expenditures in the budget.
  - New senior officials in General Directorates of Budget, Customs, and Taxes, and Office of Inspector-General of Finance to revamp revenue administration and strengthen control.
  - Improved tracking of oil revenues and budgetary expenditures.
  - Emphasis on oil sector and natural resource transparency, including internet publication of quarterly oil revenue certification reports, full 2003 audit report of the national oil company (SNPC), terms and conditions of SNPC financial transactions for the government, and all active production-sharing agreements.
  - Authorities announced commitment to adhere to the Extractive Industry Transparency Initiative (EITI).
  - No new loans with maturity exceeding one year using oil as collateral contracted since October 2002.

### Medium-to-long-term macroeconomic framework and projections
- Macroeconomic projections prepared jointly with the authorities extend to 2023 (Tables 1 and 2 referenced).
- Forecasts assume sound macroeconomic policies, increased investment in infrastructure and human capital, structural reforms for business environment and output diversification, and policies enhancing transparency, governance, and rule of law.
- Baseline scenario assumes Congo benefits from traditional debt relief mechanisms with significant downward impact on debt service.
- Growth projections:
  - Real GDP growth projected at about 4.7 percent per year during 2005-23.
  - Significant rise in investment projected (see Tables 1 and 2).
  - Nonoil sector share projected to rise from about 50 percent in 2004 to some 80 percent by 2023 due to depleting oil production and stronger nonoil growth.
  - Oil production expected to increase until 2010 as new fields come on stream, then decline over the following two years.
  - Oil-sector real GDP projected to grow by about 1 percent per annum over 2005-23.
  - Nonoil real GDP growth projected to accelerate steadily over the period, driven by higher investment and structural reforms.
- Comment on poverty reduction: Projected economic growth is below that needed to halve the proportion of the population living below the poverty line (i.e., about 8 percent per annum in the nonoil sector), but is considered realistic and likely to be achievable and sustainable.

*Source: IMF-World Bank staff joint assessment as presented in the document.*

### 15.      Fiscal revenues (including oil and nonoil) are projected at about 27½ percent of GDP

### 15.      Fiscal revenues (including oil and nonoil) are projected at about 27½ percent of GDP

### Fiscal revenue projections and composition
- Fiscal revenues (including oil and nonoil) are projected at about 27½ percent of GDP per year on average during 2005-23, compared to 29 percent on average over 2000-04.
- Nonoil revenues are projected to rise steadily to about 16½ percent of GDP by 2023 (from around 9 percent in 2004).
- Oil revenues are projected to be lower by almost 6 percentage points of GDP per year on average during 2005-23 (relative to 2000-04), reflecting the decline in the oil sector’s importance.

### Measures to enhance nonoil revenues and compliance
- Recent measures taken to widen the tax base and extend the reach of the central administration include:
  - systematic transfer of revenues to the Treasury;
  - widening territorial coverage of tax and customs administrations;
  - improvement in computer linkages at the customs office in Pointe Noire;
  - reinforcement of the customs and tax administrations;
  - strengthening management of the value-added tax.
- Medium-to-long-term measures to enhance nonoil revenues:
  - conduct of regular tax audits;
  - establishment of computerized links between the various customs and tax administration offices;
  - use of the single taxpayer identification number;
  - elimination of discretionary tax exemptions.
- Expectation: compliance by taxpayers would rise significantly on the basis of improved government services.

### Public expenditure composition and tracking
- Composition of public expenditures is expected to shift in favor of capital outlays over the long term.
- Projections assume the share of pro-poor spending in overall outlays will increase in line with the authorities’ I-PRSP to advance progress toward the MDGs.
- Authorities’ plans to better track public spending:
  - strengthen the framework for tracking expenditures from the commitment to the payment stage;
  - complete the introduction of a functional and economic classification in the budget nomenclature (already underway with technical assistance from the IMF and the World Bank).
- Authorities intend to improve tracking of poverty-related expenditures, with assistance from the World Bank, and plan to review the public procurement system.

### Growth accounting for non-oil GDP (Box 3)
- Production function used: Y = A L^0.6 K^0.4, where Y is non-oil real GDP; A is total factor productivity (TFP, Solow residual); L is labor force; K is physical capital in the non-oil sector.
- Caveat: capital stock series constructed using simplifying assumptions and may contain significant errors.
- Summary findings:
  - Factor accumulation explained the bulk of non-oil output growth during 1970–2004, with TFP playing a limited role.
  - The civil wars of the 1990s led to sharp deceleration of factor accumulation and a negative Solow residual.
  - Post-war pickup in non-oil output was accompanied by a significant catch-up in productivity.
  - Growth forecast for 2005-23 predicated on greater factor accumulation and a slightly larger Solow residual.
  - Investment expected to be larger by about 6 percentage points of GDP per year on average between 2000-04 and 2005-23 due to improved business environment and complementary government investment in physical and human capital.
  - Faster productivity growth expected to come mainly from (i) the secondary impact of increased investment in the oil sector, and (ii) a pickup in overall productivity from structural reforms and infrastructure investments.
- Congo: Sources of Non-Oil GDP Growth, 1970-2023 (selected figures)
  - Non-oil real GDP growth (1970-79 / 1980-89 / 1990-99 / 2000-04 / 1970-89 / 2005-23 Proj.): 3.6 5.8 -2.3 9.6 4.7 6.0
  - Factor accumulation 1/: 3.6 3.5 1.9 5.1 3.6 4.8
  - Solow residual: 0.0 2.3 -4.2 4.5 1.1 1.2
  - Memorandum items:
    - Labor growth: 2.5 2.8 2.9 2.9 2.7 2.7
    - Capital stock growth: 5.2 4.5 -2.6 8.4 4.9 8.0
  - Sources: Congolese authorities; and Fund staff calculations.
  - 1/ Accumulation of capital and labor, using 0.4 and 0.6 as factor shares, respectively.

### Fiscal balance and conservative rules
- Overall budget balance projected to remain positive throughout the forecast period, but to decline significantly from 2012 onward reflecting a projected decline in oil revenues.
- Authorities are implementing a conservative fiscal rule regarding oil revenue projections: under the rule, oil revenues (and, consequently, expenditures) should be projected on the basis of conservative oil projections (IMF, WEO projected price minus US$4 per barrel).

### External sector, exports, and financing needs
- Export volume expected to grow by 3½ percent per year on average during 2005-23.
- Share of oil exports projected to decline from 65 percent of GDP in 2004 to less than 30 percent by 2023.
- Rescheduling of arrears to Paris Club creditors projected to raise debt service to about 8 percent of GDP a year on average over the period 2005-07.
- In 2005, financing is assured thanks to resources already committed by bilateral and multilateral donors, and financing assurances provided by Paris Club creditors.
- Large external arrears to commercial creditors amount to some US$2.5 billion, and debt service due to Paris Club creditors (past the 6 years grace period) give rise to large financing needs.
- Further debt relief will be key to meeting the financing requirements.

### Internal debt and arrears
- Large internal debt stock stood at about CFAF 560 billion at end-2003 (27 percent of GDP), with social debt (e.g., salary and pension arrears) amounting to about CFAF 240 billion.
- Authorities committed to preparing a comprehensive plan to settle domestic arrears and to publish the related policy framework on the internet.
- Government signed a “social truce” with the labor unions under which the gradual clearance of arrears on wages and pensions began in 2004.
- Government will settle domestic arrears on other categories of debt on the basis of the domestic arrears settlement plan.

### Private sector development and structural reforms
- Private sector development seen as key to pro-poor growth.
- Measures and expected reforms:
  - one-stop tax window established to streamline the tax burden on enterprises;
  - reform legal and judicial framework for business with World Bank assistance, including better guarantees on property rights and independence of the judiciary;
  - consolidate progress with privatization in refined petroleum products distribution, banking, and telecommunications;
  - rehabilitate and upgrade management of water and electricity utilities with World Bank assistance to improve service delivery and prospects of privatization;
  - continue efforts to complete concession of the Pointe Noire–Brazzaville railways link;
  - promote unrestricted public access to comprehensive tax and customs laws and regulations, including dissemination in the Journal Officiel.

### Agriculture and rural development challenges
- Major challenges: production and marketing constraints.
  - Production constraints: primitive technologies and limited support from research and agricultural extension services.
  - Marketing constraints: high market transaction costs due mainly to inefficient rural transport infrastructure.
- In 2003, government developed a national agricultural policy (adopted by the Council of Ministers in late 2003) with objectives to:
  - increase food security;
  - reduce food imports;
  - revitalize agricultural exports;
  - create jobs in rural areas;
  - reduce rural-urban migration;
  - manage natural resources sustainably;
  - diversify sources of growth.
- Authorities have actively sought participation of donor community and grassroots organizations.

### Debt sustainability analysis (DSA) and reconciliation status
- DSA prepared jointly by the authorities and the staffs of IDA and the IMF, based on loan-by-loan data as of end-December 2003.
- Debt reconciliation began in August 2003 and continued in May 2004; completed for multilateral debt and much progress for bilateral and commercial creditors.
- About 70 percent of external debt reconciled with creditors as of end-2003.
- Debt estimates and NPV calculations presented are preliminary, pending further information from bilateral and commercial creditors.
- The DSA underlying the Decision Point document will be prepared on the basis of end-2004 debt data.

### Structure and magnitude of external debt (end-December 2003)
- Public and publicly guaranteed external debt estimated at US$8.5 billion in nominal terms, or US$8.4 billion in net present value (NPV) terms as of end-December 2003.
- This corresponds to an NPV of debt of:
  - 806 percent of fiscal revenue,
  - 338 percent of exports,
  - 235 percent of GDP as of end-2003.
- Composition features:
  - Multilateral and official bilateral creditors account for about two thirds of the total debt stock.
  - Multilateral debt represents about 8 percent of the total stock.
  - Official bilateral debt accounts for 59 percent (bulk owed to Paris Club creditors).
  - Commercial debt represents 33 percent of total stock; about two thirds of this (21 percent of total stock) owed to London Club creditors.
  - Oil-collateralized loans account for 5½ percent of total stock.
  - Some debt is under litigation; court-awarded claims could be much larger than face value.
  - Very low grant element: nominal debt is very close to its NPV, especially for bilateral official and commercial debt.
- State-owned oil company (SNPC) obligations to international oil companies of some US$1 billion at end-2003 (not taken into account as part of the DSA in this document, following authorities’ methodology).

- Table excerpt (Congo: Net Present Value of External Debt, end-2003):
  - Total 1/: 8,385 (Million U.S. dollars) — 100 percent
  - Multilateral: 558 — 7 percent
  - Official bilateral: 4,982 — 59 percent
    - Paris Club: 4,675 — 56 percent
    - Other: 307 — 4 percent
  - Commercial: 2,845 — 34 percent
  - Memorandum items:
    - Oil-collateralized debt: 481 — 6 percent
    - NPV of debt after traditional relief 2/: 4,920 ...
    - In percent of government revenue: 473 ...
    - In percent of exports: 197 ...
  - Sources: Congolese authorities; and Fund and Bank staff estimates and calculations.
  - 1/ Excluding potential debt of the SNPC.
  - 2/ Results of preliminary assessment under Naples terms.

### Paris Club rescheduling and preliminary effects
- In December 2004, Congo received a Paris Club debt restructuring under Naples terms.
- After simulating this treatment for bilateral and commercial debt, and excluding clearance of multilateral arrears, the stock of external debt outstanding in NPV terms is US$5 billion as of end-2003.
- Decline in NPV from concessional rescheduling by multilaterals will be counted towards their contribution to debt reduction under the enhanced HIPC Initiative.

### Possible HIPC Initiative assistance and implications
- Debt relief under the enhanced HIPC Initiative would reduce Congo’s external debt by nearly one half.
- After full use of traditional debt-relief mechanisms, bringing external debt-to-fiscal revenues ratio down from 473 percent at end-2003 to target ratio of 250 percent implies:
  - a common reduction factor of 47.1 percent for all creditors;
  - relief of US$2,319 million in NPV terms.
- Expected creditor contributions (NPV terms):
  - Multilateral creditors: about US$265 million;
  - Paris Club bilateral creditors: about US$1,265 million;
  - Commercial creditors: about US$684 million;
  - Other official bilateral creditors: US$105 million.
- Translating into debt-service relief over time: about US$4,220 million.
- Assumptions for time profile and modalities:
  - Paris Club bilateral creditors: flow rescheduling on Cologne terms—i.e., a 90 percent NPV reduction—after Decision Point, with remaining assistance at Completion Point via stock-of-debt operation.
  - Comparable treatment by non-Paris Club official bilateral creditors and commercial creditors.
  - IMF assistance: total US$12.6 million in NPV terms. IMF would provide interim assistance immediately following Decision Point approval in the form of debt-service reduction in 2005-07, covering current obligations, including interest on the PRGF arrangement approved in December 2004. Principal repayments on IMF PRGF loans will begin in August 2009. Most IMF relief delivered following Completion Point.
  - IDA assistance: total US$67.7 million in NPV terms. IDA would begin to provide debt service relief immediately following Decision Point approval and continue debt-service reduction until 2025, assuming Completion Point at end-2007.
  - All other creditors assumed to provide debt-service reduction starting at Decision Point or Completion Point until their contributions meet enhanced HIPC Initiative requirements.

*Source: _cr05391 - 15.      Fiscal revenues (including oil and nonoil) are projected at about 27½ percent of GDP*

### 27.      Congo is eligible for debt relief under the enhanced HIPC Initiative’s fiscal window.

### _cr05391 - 27.      Congo is eligible for debt relief under the enhanced HIPC Initiative’s fiscal window.

### Eligibility for the enhanced HIPC Initiative fiscal window
- Fiscal-window eligibility criteria established in April 1997:
  - export-to-GDP ratio of at least 30 percent, and
  - fiscal revenues-to-GDP ratio of at least 15 percent,
  - using an average of the last three years of actual data.
- Congo’s ratios as of 2003:
  - exports-to-GDP ratio: about 79 percent
  - fiscal revenues-to-GDP ratio: about 29 percent

### Debt projections and debt service after HIPC assistance
- NPV of external debt-to-fiscal revenues (including new borrowing) projections:
  - 247 percent at end-2003
  - 169 percent in 2004 (after phased-in full delivery of HIPC assistance)
  - Remains below the HIPC threshold of 250 percent over the projection period
  - Reaches 60 percent by the end of the projection period
- External debt service-to-fiscal revenues:
  - 56.1 percent in 2005
  - Remains at elevated levels until end-2007
  - Falls sharply after 2007 and would remain below 10 percent thereafter
  - From 2010 to the end of the projection period, the debt service burden will be at or below the average burden in other decision point HIPCs
- Implementation note:
  - Normalization of relations with the international community requires significant effort to mobilize resources for debt service over the 2006-07 period; donor resources will also shoulder some of this burden.

### Sensitivity analysis: alternative shock scenarios
- Two scenarios to test sustainability after HIPC assistance highlight Congo’s vulnerability to adverse shocks:
  - Oil price shock scenario:
    - Oil prices assumed to fall by 25 percent throughout the forecast period relative to the baseline price assumptions.
    - Accompanying second-round effects on GDP growth are included.
    - Result: the ratio of the NPV of external debt-to-fiscal revenues is on average higher by about 22 percentage points per year over the period 2004-13 relative to the baseline.
  - Non-oil growth shock scenario:
    - A two-percentage point lower non-oil GDP growth throughout the projection period.
    - Result: the NPV of external debt-to-fiscal revenues over the period 2014-23 is higher by about 8 percentage points per year relative to the baseline.

### PRSP process, decision point timing, and completion point triggers
- I-PRSP and poverty assessment:
  - Interim PRSP prepared based on consultations in the second half of 2003.
  - I-PRSP estimates that 50 percent of the population are poor.
  - This estimate contrasts with the World Bank’s 1996 estimate of 70 percent; an ongoing household survey is expected to provide a sound basis for examination of the poverty situation.
  - Full PRSP development planned for 2005, expected ready in late 2006.
- Recommended timing for Decision Point:
  - Staffs recommend the Decision Point document for Congo be considered by the Boards of their institutions by late 2005 on a stand-alone basis before the completion of the second PRGF review envisaged for February 2006.
- Possible timing for HIPC completion point:
  - If Congo remains on track with PRSP implementation and reforms, the HIPC completion point could be reached in the second half of 2007 or the first half of 2008.
- Possible triggers for the floating completion point (summary of preliminary understandings):
  - PRSP implementation: preparation of full PRSP through a participatory process and satisfactory implementation for at least one year, evidenced by an Annual Progress Report analyzed in a Joint Staff Advisory Note.
  - Macroeconomic management: maintenance of macroeconomic stability via satisfactory implementation of an ongoing IMF PRGF-supported program.
  - Public expenditure priorities: alignment of public spending with I-PRSP priorities emphasizing pro-poor growth.
  - Public finance management: (i) preparation and execution of government budgets using a functional and economic budget classification system that allows tracking of poverty-related spending; and (ii) reform of public procurement, including adoption and implementation of a new procurement code and key implementing decrees.
  - Natural resource management: measures to strengthen transparency and governance in the oil and forestry sectors (e.g., dissemination of information; reinforcement of SNPC’s accounting system, internal control, and marketing; transparent revenue mobilization; forest management and forest law enforcement; and transparent adjudication of concessions in forestry).
  - Structural reforms: finalization of legal and regulatory framework accompanying public enterprise reform and privatization, including measures to combat corruption and promote good governance.
  - Social development sectors: (i) measures to improve the quality of, and access to, health and education, especially at the primary level; (ii) increased awareness and prevention campaigns for HIV/AIDS and care for persons infected; and (iii) monitorable improvements in supplies of potable water, removal of waste waters, sanitation services, electricity in rural and urban communities, and road maintenance.
  - External debt management: (i) quarterly validation of external debt data and updating of debt service, including debt service projections; (ii) publication of the quarterly external debt data in an official statistical publication; and (iii) centralization of the government’s oil related debt and financing information in the government’s debt agency (CCA).

### Monitoring and use of HIPC Initiative resources
- Key requirements for effective use of debt relief:
  - Strengthen programming, management, and control of expenditure and improve service delivery in key sectors.
  - IDA and IMF technical assistance in public expenditure management is essential to restore adequate budget management capacity.
- Public Expenditure Review (PER):
  - First PER conducted in 2004; a component will identify core priorities for poverty-reduction spending in line with the I-PRSP.
  - PER final report expected to be published in September 2005.
- Institutional arrangements and safeguards:
  - Poverty reduction programs supporting pro-poor growth should be prepared according to standard budget procedures; eligibility for HIPC funding subject to non-objection of the monitoring committee.
  - Arrangements will empower local communities to participate in defining priorities and monitoring service delivery.
  - Use of HIPC resources subject to independent technical and financial audits; all such audits would be made publicly available.
- Interim assistance timing:
  - If the Decision Point is reached in late 2005, poverty-related programs and projects to be financed with interim assistance would need to be included in the 2006 government budget.
  - Given urgent reconstruction needs, HIPC financing from debt relief is likely to focus on priority program areas summarized below.

### Possible expenditure priorities (Box 6)
- Governance
  - Improve citizen's access to information on public affairs, as a means to enhance transparency and accountability.
  - Finance a results-based monitoring and evaluation system, as a management tool for efficient public resources utilization.
  - Reform judicial system.
- Social Protection
  - Resettle and reintegrate ex-combatants.
  - Reintegrate civil strife victims.
  - Provide social safety nets linked to employment creation, especially for youth.
- Infrastructure/Urban
  - Rehabilitate roads, particularly rural access roads.
  - Rehabilitate and expand coverage of water supply systems.
  - Rehabilitate power grids.
- Health
  - Intervene to control the spread of HIV/AIDS.
  - Promote immunization, good hygiene, the use of oral hydration salts, and good nutrition practices; the use of bed nets to prevent malaria, and condoms to prevent unwanted pregnancies and sexually transmitted diseases.
  - Rehabilitate health infrastructure.
  - Develop human resources.
  - Strengthen the pharmaceutical sector.
- Education
  - Raise significantly the share of expenditures on education in total public expenditure.
  - Hire additional teaching staff (for primary schools).
- Rural
  - Improve access to rural financial services.
  - Improve rural roads.
  - Improve policy formulation capacity in the Ministry of Agriculture.

*Source: _cr05391 - 27.      Congo is eligible for debt relief under the enhanced HIPC Initiative’s fiscal window.*

### 39.      This paper presents a preliminary assessment of Congo’s eligibility for assistance

### _cr05391 - 39.      This paper presents a preliminary assessment of Congo’s eligibility for assistance

### Purpose and issues for Executive Directors
- Paper presents a preliminary assessment of Congo’s eligibility for assistance under the enhanced HIPC Initiative.
- Executive Directors’ views and guidance are sought on:
  - Eligibility: Do Directors agree that Congo is likely to meet the eligibility criteria under the fiscal window of the enhanced HIPC Initiative?
  - Timing of the Decision Point: Do Executive Directors agree that Congo could reach its Decision Point by late 2005, that is, before the completion of the second review under the PRGF-supported program, provided that (i) the country remains on track with its macroeconomic program, supported by an arrangement under the PRGF, (ii) understandings are reached on appropriate Completion Point triggers, and (iii) further progress is made toward debt reconciliation (including on outstanding questions related to SNPC’s financial obligations)?
  - Floating Completion Point: What are Executive Directors’ views on the possible triggers and key policy measures linked to the floating completion point?
  - Commercial creditors: About a third of Congo’s outstanding debt is owed to commercial creditors, a part of which is under litigation; this could complicate the enhanced HIPC Initiative process. Directors’ views on the handling of this issue are requested.

### Debt composition (end-2003, Figure 1)
- Paris Club: 54%
- Other Official Bilateral: 5%
- Commercial: 29%
- Other Multilateral Creditors: 2%
- World Bank: 3%
- IMF: 1%
- AfDB Group: 6%
- Note: Figure 1 assumes a hypothetical stock of debt operation on Naples terms at end-2003 on all Paris Club creditors and comparable treatment for other bilateral and commercial creditors.

### Debt sustainability indicators and projected ratios (Figures 2–3; Tables 4, 7, 8)
- Key projected indicator series (2004–23) include:
  - NPV of debt-to-revenue ratio (multiple scenario traces shown: After HIPC assistance; Before rescheduling; After traditional relief).
  - Debt service-to-revenue ratio (multiple scenario traces shown: After HIPC assistance; Before rescheduling; After traditional relief).
- Table 4 — Selected NPV of external debt (millions of U.S. dollars):
  - I. Before traditional debt-relief:
    - NPV of total debt: 8,385 (2003); 8,067 (2004); 7,781 (2005); 7,567 (2006); 7,391 (2007); 7,059 (2010); 7,063 (2015); 7,109 (2020); 7,186 (2023); 7,310 (2004–14 average); 7,109 (2015–23 average).
    - NPV of outstanding debt: 8,385 (2003); 8,046 (2004); 7,732 (2005); 7,486 (2006); 7,271 (2007); 6,814 (2010); 6,633 (2015); 6,457 (2020); 6,375 (2023); 7,104 (2004–14 average); 6,501 (2015–23 average).
  - II. After traditional debt-relief:
    - NPV of total debt: 4,920 (2003); 4,765 (2004); 4,211 (2005); 3,782 (2006); 3,440 (2007); 3,333 (2010); 3,287 (2015); 3,031 (2020); 2,731 (2023); 3,594 (2004–14 average); 3,067 (2015–23 average).
    - NPV of outstanding debt: 4,920 (2003); 4,744 (2004); 4,163 (2005); 3,701 (2006); 3,320 (2007); 3,087 (2010); 2,857 (2015); 2,379 (2020); 1,921 (2023); 3,389 (2004–14 average); 2,459 (2015–23 average).
  - III. After enhanced HIPC assistance:
    - NPV of total debt (conditional delivery): 8,242 (2003); 5,211 (2004); 4,504 (2005); 4,103 (2006); 1,076 (2007); 1,004 (2010); 1,088 (2015); 1,269 (2020); 1,382 (2023); 2,009 (2004–14 average); 1,230 (2015–23 average).
    - NPV of total debt after full delivery (end-2003 hypothetical full delivery): 2,572 (2003); 2,376 (2004); 1,785 (2005); 1,366 (2006); 1,076 (2007); 1,004 (2010); 1,088 (2015); 1,269 (2020); 1,382 (2023); 1,255 (2004–14 average); 1,230 (2015–23 average).
    - NPV of outstanding debt after enhanced HIPC assistance: 8,242 (2003); 5,190 (2004); 4,455 (2005); 4,022 (2006); 956 (2007); 759 (2010); 658 (2015); 617 (2020); 572 (2023); 1,803 (2004–14 average); 622 (2015–23 average).
- Table 7 — Selected external debt indicators (after traditional debt relief mechanisms, conditional and unconditional HIPC delivery):
  - After traditional debt relief mechanisms:
    - NPV of debt-to-GDP ratio: 138 (2003); 110 (2004); 78 (2005); 49 (2010); 44 (2015); 31 (2020); 23 (2023).
    - NPV of debt-to-exports ratio: 197 (2003); 160 (2004); 116 (2005); 69 (2010); 72 (2015); 59 (2020); 49 (2023).
    - NPV of debt-to-revenue ratio: 473 (2003); 341 (2004); 208 (2005); 170 (2010); 166 (2015); 121 (2020); 93 (2023).
  - After conditional delivery of enhanced HIPC assistance:
    - NPV of debt-to-GDP ratio: 231 (2003); 120 (2004); 84 (2005); 15 (2010); 15 (2015); 13 (2020); 12 (2023).
    - NPV of debt-to-exports ratio: 330 (2003); 175 (2004); 124 (2005); 21 (2010); 24 (2015); 25 (2020); 25 (2023).
    - NPV of debt-to-revenue ratio: 792 (2003); 373 (2004); 222 (2005); 51 (2010); 55 (2015); 147 (2020); 147 (2023).
  - After unconditional delivery of enhanced HIPC assistance:
    - NPV of debt-to-GDP ratio: 725 (2003); 533 (2004); 315 (2005); 15 (2010); 15 (2015); 13 (2020); 12 (2023).
    - NPV of debt-to-exports ratio: 1038 (2003); 049 (2004); 921 (2005); 242 (2010); 525 (2015); 25 (2020); 25 (2023).
    - NPV of debt-to-revenue ratio: 247 (2003); 170 (2004); 885 (2005); 155 (2010); 514 (2015); 77 (2020); 47 (2023).
- Table 8 — Sensitivity analysis (after HIPC assistance assumed delivered unconditionally at end-2003):
  - Baseline scenario averages:
    - NPV of debt-to-GDP ratio: 120 (2004); 84 (2005); 151 (2010); 51 (2015); 31 (2020); 23 (2023); Averages 7? (2004–14) 13? (2015–23) — (table lists: 120 84 151 51 31 23 7 13).
    - NPV of debt-to-exports ratio: 142 (2004); 102 (2005); 192 (2010); 324 (2015); 244 (2020); 72 (2023); averages 4? 24? (table lists numbers: 142 102 192 324 2447 24).
    - NPV of debt-to-revenue ratio: 373 (2004); 222 (2005); 515 (2010); 551 (2015); 47 (2020); 147 (2023); averages 1? 75? 1 (table lists: 373 222 515 551 147 1751).
  - Lower oil price scenario (assumes international oil price drop by 25 percent) and Non-oil GDP shock (assumes drop of 2 percentage point of real non-oil GDP growth) show higher NPV and debt-service ratios; specific scenario values are tabulated in the source.

### External debt service (Table 6) — summary flows and effects of HIPC
- Total debt service (before traditional debt relief) averages and selected years (in millions of U.S. dollars):
  - Total: 450 (2004); 422 (2005); 118 (2010); 849 (2015); 480 (2020); 224 (2023); averages 84 (2004–2014); 84 (2015–23) — (table provides detailed multi-year series).
  - After traditional debt relief: Total 386 (2004); 800 (2005); 200 (2010); 202 (2015); 263 (2020); 292 (2023).
  - After HIPC assistance: Total 133 (2004); 728 (2005); 104 (2010); 606 (2015); 579 (2020); 217 (2023).
- Debt service-to-exports and debt service-to-revenue ratios are reported in the table for before/after treatments and averages for 2004–2014 and 2015–23.
- Table 9 (World Bank delivery example) and Table 10 (IMF delivery example) present proposed delivery schedules and savings:
  - World Bank Group HIPC assistance: enhanced HIPC assistance of $68 million in end-2003 NPV terms proposed to be delivered over about 21 years through a 63 percent relief on the debt service falling due to IDA on credits outstanding at end-2003, corresponding to a nominal relief of $114 million.
  - Table 9 shows annual IDA principal and interest reductions and cumulative savings (e.g., Savings on debt service to World Bank Group: 68 (mem.), cumulative savings 71.9; detailed year-by-year principal and interest components are tabulated).
  - Table 10 (IMF possible delivery of assistance 2005–15): Total IMF assistance under the enhanced HIPC Initiative is US$ 12.48 million in NPV terms calculated on the basis of data available at the decision point, excluding interest earned on Republic of Congo's account and on committed but undisbursed amounts as described in footnotes. Selected schedule lines include:
    - Delivery schedule of IMF assistance (in percent of the total assistance): 20.0 (2005), 6.0 (2010), 14.0 (2015) — (table shows detailed percent allocations by year).
    - Debt service due on IMF obligations (in millions of U.S. dollars): 6.4 (2005); 4.5 (2006); 0.4 (2007); 0.4 (2008); 0.4 (2009); 2.7 (2010); 2.5 (2015).
    - IMF assistance—deposits into Republic of Congo's account (Interim assistance / Completion point assistance): Interim assistance 2.5 (2005); 1.6 (2006); Completion point assistance 8.4 (unspecified year in table).
    - Share of debt service due on IMF obligations covered by IMF assistance (in percent): 55.9 (2006); 9.5 (2007); 23.1 (2008); 59.2 (2009); 97.7 (2010); 75.9 (2015).
  - Table 10 memorandum items: Total debt service due (in millions of U.S. dollars) 421.9 (2005); 330.7 (2006); 276.1 (2007); 260.0 (2008); 245.3 (2009); 118.2 (2010); 84.0 (2015). Debt service due on IMF obligations (in millions of U.S. dollars) 6.4 (2005); 4.5 (2006); 0.4 (2007); 0.4 (2008); 0.4 (2009); 2.7 (2010); 2.5 (2015).
- Table 9 notes: Decision point expected December 2005; delivery of the interim assistance by the World Bank Group expected to start in July 2005. World Bank Group HIPC assistance is entirely delivered by IDA.

### Macroeconomic projections and selected indicators (Tables 1–2)
- Table 1 — Selected economic and financial indicators, 2001–07 (selected series and values as reported):
  - GDP at constant prices (annual percentage change): 2001: 3.8; 2002: 4.6; 2003: 0.8; 2004: 3.6; 2005: 9.2; 2006: 4.8; 2007: 1.5 (Est).
  - Oil production (in millions of barrels): 2001: 89.6; 2002: 88.0; 2003: 81.7; 2004: 82.1; 2005: 94.7; 2006: 97.9; 2007: 92.6.
  - World oil price (in U.S. dollars per barrel): 2001: 24.3; 2002: 24.9; 2003: 28.8; 2004: 38.2; 2005: 45.2; 2006: 39.8; 2007: 37.0.
  - Gross official foreign reserves (in billions of CFA francs): 2001: 53.6; 2002: 22.2; 2003: 20.5; 2004: 60.4; 2005: 101.3; 2006: 149.9; 2007: 182.2.
  - Nominal GDP (in billions of CFA francs): 2001: 2,048; 2002: 2,105; 2003: 2,072; 2004: 2,294; 2005: 2,685; 2006: 2,679; 2007: 2,604.
- Table 2 — Selected indicators of long-term macroeconomic projections, 2005–23 (averages and projections):
  - Real GDP growth (percent change) projections: 2005: 9.2; 2010: 5.8; 2015: 4.5; 2020: 5.1; 2023: 5.4; 2000–04 average: 4.1; 2005–14 average: 4.5; 2015–23 average: 5.0.
  - Oil: 2005: 16.7; 2010: 5.9; 2015: 0.0; 2020: 0.0; 2023: 0.0.
  - Non-oil: 2005: 5.5; 2010: 5.7; 2015: 6.0; 2020: 6.3; 2023: 6.5.
  - Population (millions): 2005: 3.3; 2010: 3.8; 2015: 4.3; 2020: 4.9; 2023: 5.3. Percent change: 2.9 (2005); 2.9 (2010); 2.8 (2015); 2.6 (2020); 2.5 (2023).
  - CPI index (percent change): 2.0 (2005); 2.0 (2010); 2.0 (2015); 2.0 (2020); 2.0 (2023).
  - Exports (percent of GDP): 82.3 (2005); 78.2 (2010); 62.5 (2015); 53.5 (2020); 47.9 (2023); of which crude oil: 67.2 (2005); 60.1 (2010); 41.0 (2015); 31.8 (2020); 26.5 (2023).
  - Total revenue, incl. grants (percent of GDP): 38.1 (2005); 29.5 (2010); 27.1 (2015); 26.0 (2020); 25.3 (2023).
  - Fiscal revenue (percent of GDP): 37.7 (2005); 28.9 (2010); 26.5 (2015); 25.4 (2020); 24.7 (2023). Of which oil: 29.6 (2005); 19.2 (2010); 13.0 (2015); 9.9 (2020); 8.2 (2023). Non-oil revenue: 8.2 (2005); 9.7 (2010); 13.4 (2015); 15.5 (2020); 16.5 (2023).
  - Overall fiscal balance, incl. grants (commitment basis): 14.8 (2005); 4.7 (2010); -0.6 (2015); -0.8 (2020); -0.9 (2023).

### HIPC-assistance design parameters and burden-sharing (Tables 5, 3, 4)
- Table 5 (HIPC assistance under proportional burden-sharing approach):
  - Common reduction factor shown: 47.1 percent (in NPV terms at end 2003) — NPV of debt 4,920 (total), Bilateral 4,357, Multilateral 563.
  - Paris Club creditors: 2,684 (NPV); Pre-cutoff date non-ODA debt: 2,099.
  - Non-Paris Club creditors: 1,673; commercial creditors: 1,451.
  - Central government revenues (excludes grants) used as comparator: 1,040.
  - NPV of debt-to-revenue ratio (percent) listed as 473.
- Table 3 / Table 4 provide detailed creditor-by-creditor nominal stock, arrears, NPV and post-relief NPV by creditor group (multilateral; Paris Club; other bilateral; commercial), including assumptions about Naples terms stock-of-debt operation and comparable actions by other creditors.

### Timing, conditionality, and operational notes
- Decision point timing: Paper asks whether Congo could reach its Decision Point by late 2005 (before completion of second PRGF review), conditional on macro program performance, Completion Point trigger understandings, and debt reconciliation progress (including SNPC obligations).
- HIPC timing assumptions in staff projections:
  - Assumes interim relief under the enhanced Initiative from December 2005 to December 2007 and full delivery of assistance in December 2007 (Table 4 notes).
  - Assumes full delivery of HIPC assistance through a Cologne flow treatment between December 2005 and December 2007, and a Cologne stock of debt treatment at completion point from Paris Club and commercial creditors. Multilateral creditors are assumed to provide their share of HIPC debt relief as of the completion point, except for the IMF, the World Bank and the AfDB, for which delivery would start as of the decision point (June 2005) (Table 6 notes).
- Commercial creditor litigation risk: About one-third of outstanding debt is owed to commercial creditors, some under litigation, which could complicate the enhanced HIPC Initiative process.

*Source: _cr05391 - 39.      This paper presents a preliminary assessment of Congo’s eligibility for assistance (IMF staff document).*

### 1998. T

### 1998. T

### I. INTRODUCTION
- Public enterprise external debt is included in the debt sustainability analysis (DSA) with the exception of debt held by the national oil company, Société Nationale des Petroles du Congo (SNPC).
- SNPC features:
  - Largest Congolese public enterprise with a special corporate governance structure permitting independent commercial operation.
  - Entrusted with fiscal agency functions in the oil sector, including management of the state’s oil assets and marketing of the state’s in-kind oil revenue from production sharing agreements (PSAs).
  - Assets at end-2003 estimated at US$1.2 billion, largely equity participations in oil joint ventures (shares ranging from 15 to 50 percent).
  - Capital relatively small because assets are offset by large liabilities, mostly overdraft balances with joint venture partners and substantial financial and other debts.
  - Relatively easy access to external financing due to steady oil income from equity participations and role as marketer of government fiscal oil.
- Authorities have provided extensive information to Fund and World Bank staffs and are committed to resolving outstanding questions.

### II. OVERDRAFT DEBT
- Nature and scale:
  - SNPC’s overdraft debt totaled US$954 million at end-2003.
  - Overdrafts arise because SNPC (and predecessor HydroCongo) did not pay cash for equity shares in joint ventures but borrowed via “advance accounts” (carried interest) from joint-venture partners.
  - Advance accounts are reimbursed from SNPC equity oil income once production starts; reimbursement is contingent on oil income.
  - Reimbursement in any period is limited to a portion of oil income to ensure SNPC minimum cash flow, slowing reimbursement rate.
- Historical points:
  - At creation in 1998, SNPC took over eight overdraft accounts from Hydro-Congo governed by four joint-venture agreements from the early 1970s and late 1980s.
  - Balances in those accounts totaled US$954 million at end-2003.
- Three outstanding eligibility/questions for inclusion in the DSA:
  - Whether balances constitute debt given reimbursement is contingent on oil income.
  - If advances are debt, legal residency of creditors determines external vs. domestic classification.
  - If determined to be external debt, the stock at end-2004 needs reconciliation with creditors and a debt service profile established.
- Fund and Bank staff preliminary views:
  - Unclear whether overdraft balances are debt; staff continues examination aiming for definitive answer by Decision Point under the enhanced HIPC Initiative.
    - Arguments that they may not be debt: contingent nature, no direct transfer absent oil revenues; obligations represent amounts due by SNPC to private partners for equity paid on its behalf, with understanding that part of SNPC equity income will reimburse partners.
    - Counterargument: “carried interest” debt resembles “production payments” treated by U.S. Internal Revenue Service as a mortgage loan on property (joint venture participation).
  - Of the eight creditors at end-2003, two appear to be Congolese resident companies; if confirmed, potential external debt reducible from US$954 million to US$489 million.
  - Staff estimated total advance account balances as US$954 million from statements provided by joint venture partners, but external auditors raised concerns about lack of reconciliation between SNPC and partners regarding overdraft balances.

### III. OTHER DEBT AND GUARANTEES
- End-2003 external audit report summary:
  - “Loans and various financial debts”: US$235 million.
  - “Other debts” linked to transactions for the government: US$357 million.
  - Total listed: US$615 million.
  - About US$380 million of this total “other” debt consists of oil-collateralized loans already captured in the DSA.
  - Remaining components:
    - Domestic debt to suppliers of the national oil refinery: US$20 million.
    - SNPC debt to the government for government oil sold but not yet cashed: US$87 million.
    - Remaining liability requiring regularization: US$67 million.
- Authorities confirmed the absence of guarantees between SNPC and external parties.

### IV. DEBT MANAGEMENT CAPACITY
- Institutional context:
  - The Caisse Congolaise d’Amortissement (CCA) at the Ministry of Finance is the sole agency responsible for collection of debt statistics and debt management.
- Current capabilities and gaps:
  - Debt management agency can produce electronic reports on public and publicly guaranteed external debt, but computer system needs improvement.
  - CCA’s computers are not linked; only one computer has the debt software necessary to produce debt statistics. Data are entered manually into another computer containing Excel templates with summary information.
  - Differences in accounting methods and irregular updates of interest and exchange rates can lead to errors in estimates of outstanding debt stock.
  - Debt statistics are not comprehensive: detailed information on debt contracted by SNPC and other state-owned enterprises is not included in the system and is kept in paper format with source documentation retained by SNPC.
  - CCA lacks capacity to track commercial debt under litigation and does not maintain an updated list of funds that have bought Congo’s external debt on the secondary market.
- Improvements underway and needs:
  - A modern debt reporting system is being installed (UNCTAD’s debt management system, DMFAS, version 5.3).
  - When fully operational and covering all relevant debt with necessary detail, CCA will be able to produce basic debt statistics for publication domestically and externally.
  - World Bank survey identified CCA staff training needs in:
    - (1) legal aspects of debt negotiation procedures and of the contracting of new debt,
    - (2) macroeconomic analysis related to debt sustainability,
    - (3) computer software utilization.
  - Recommendation: train a sufficiently large number of staff to ensure continuity of operations.
  - Longer-term needs: further strengthen debt management and reporting capacity, centralize all debt information at the CCA, continue improving relations with all creditors, and start regular data dissemination to the public.

*Source: _cr05391 - 1998. T (PDF chapter/section).*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr05391.pdf_