## _cr1077 ## Source details **Canonical URL:** [_cr1077](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr1077.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr1077.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr1077.pdf.json) --- ### Completion point readiness and HIPC assistance - Decision point (March 2006): US$ 1,679 million of debt relief committed in net present value (NPV) terms at end-2004. - Debt reconciliation at completion point: - Revised NPV of eligible external debt at end-2004 after traditional relief: US$ 5.1 billion (down from US$ 5.2 billion). - Common reduction factor revised from 32.4 percent to 31.1 percent. - Revised required HIPC assistance in end-2004 NPV terms: US$ 1,575 million (down from US$ 1,679 million). - Financing assurances: creditors representing 80.6 percent of HIPC debt relief (estimated at decision point) have provided assurances. - Staff recommendation: IDA and IMF Executive Directors approve the completion point for the Republic of Congo under the enhanced HIPC Initiative. ### MDRI implications and creditor deliveries - MDRI additional debt relief (net of HIPC assistance) in nominal terms: US$ 177.7 million. - MDRI savings in debt service through 2043: US$ 201.3 million. - MDRI allocations by creditor: - IDA: US$ 161.2 million (reduction in principal payments on eligible credits). - AfDF (AfDB Group): US$ 9.1 million. - IMF: SDR 4.8 million (equivalent to about US$ 7.4 million). - Multilateral HIPC commitments (revised): - Total multilateral: US$ 112.9 million (7.2 percent of total assistance). - IDA HIPC relief revised to US$ 47 million in end-2004 NPV terms; IDA interim delivery: US$ 13.1 million (nominal US$ 14.4 million); remaining completion point delivery: US$ 33.9 million in end-2004 NPV terms. - IMF HIPC assistance revised from SDR 5.637 million to SDR 5.395 million in NPV terms; interim IMF assistance provided: SDR 0.9 million (about US$ 1.4 million); completion point IMF delivery: stock-of-debt operation estimated at SDR 4.5 million in NPV terms (about SDR 5.4 million in nominal terms). - Composition of the US$ 1.575 billion HIPC package: - Bilateral creditors: 57 percent - Commercial creditors: 36 percent - Multilateral creditors: 7 percent ### Impact on debt burden and sustainability (key outcomes) - NPV of debt-to-revenue ratio: - At end-2004 (revised): 363 percent (revised NPV of debt US$ 5,071; central government revenues at end-2004 US$ 1,399). - After full HIPC assistance and additional bilateral assistance (actual): 38.4 percent (end-2008 actual path). - Projected NPV of debt-to-revenue ratio at end-2010 under baseline scenario: 39 percent and gradually falling over time. - Nominal stock of external debt: - End-December 2004: US$ 9,248 million (revised nominal: US$ 9,248.3 million). - End-December 2008: US$ 5,610 million. - NPV of public and publicly guaranteed external debt at end-December 2008 after full HIPC assistance: US$ 3.5 billion (63 percent of fiscal revenue; 48.6 percent of three-year average of exports). - Post-HIPC/MDRI projections: - NPV of debt-to-revenue ratio projected to fall from 250 percent at end-2004 to 66 percent in 2010 (staff projection), and to about 15 percent by 2029 under baseline. - External debt service as a ratio of revenue after full HIPC delivery: estimated at 5 percent in 2010; expected to remain below 10 percent over the projection period and decline gradually. - In end-December 2008 NPV terms, stock of debt would decline to US$ 3.7 billion at end-2010; with full HIPC, additional bilateral assistance and MDRI, stock would decline to US$ 2,014 million at the completion point (end-2008 NPV terms). ### Status of floating completion point triggers (summary of implementation) - Triggers observed/considered met include: - Trigger 1 (PRSP): Observed; full PRSP adopted April 2008; APR submitted jointly with Completion Point document. - Trigger 2 (Macroeconomic stability): Observed; 2nd PRGF review completed November 30, 2009; 3rd review projected May 2010. - Trigger 3 (Public expenditure priorities): Observed; relative spending on pro-poor sectors increased. - Trigger 4 (Public finance management): - (i) Functional classification: Observed; new classification used for 2009 budget. - (ii) Public investment management: Observed; action plan adopted December 2008; priority actions implemented in 2009 (e.g., DEP role clarified August 2009; project appraisal requirements; project appraisal funding). - (iii) Procurement code: Observed; new code adopted May 2009; institutions created (DGCMP, ARMP); implementation evidence provided. - (iv) MTEF: Observed; main elements in place and used for 2010 budget; oil revenue model introduced. - Trigger 5 (Governance and natural resource management): Observed. - Governance diagnostic and action plan: Observed; Anti-Corruption Law adopted August 2009; Observatory and Commission established. - Oil sector: - (i) SNPC internal controls and accounting: Observed; new analytical accounting system, 2006–2007 audit reservations addressed, 2008 accounts produced. - (ii) Oil commercialization: Observed; diagnostic (March 2007), action plan adopted May 2009; improvements include increased clients (4 in 2005 to 14 in 2009), end of prepayment practice, receipts transferred to treasury within 15 days, commercialization database established. - (iii) Legal text on declarations and divestiture: Observed; Decree No. 2006-32 on prevention/resolution of conflicts of interest; declarations for 2007–2009 verified with no conflicts found. - Additional sectoral triggers observed: - Forestry sector: review completed; fiscal provisions amended; decrees on concession award, impact assessment, land gazetting, and conflicting land use adopted. - Telecommunications: legal and regulatory reforms adopted; decree repealing Decree no 2004-466 and new laws in August 2009. - Social sectors: - Education: more than 2,000 new teachers hired (trigger required at least 1,000 per year until 2007). - Health: COMEG generic drugs share target met; disbursement/timing issues noted (anti-retroviral disbursement CFAF 747 million vs budgeted CFAF 3 billion; other single disbursement CFAF 500 million vs CFAF 7 billion allocated). - HIV/AIDS: testing centers increased from 2 in 2004 to about 59 in 2008 (trigger called for 10 in 2006 and 15 in 2007). - External debt management: quarterly external debt data and projections published on Ministry website; CCA centralized debt information. ### Macroeconomic performance and selected indicators (2004–2009 highlights) - Overall real GDP growth (annual percent change): 2004 3.5 | 2005 7.8 | 2006 6.2 | 2007 -1.6 | 2008 5.6 | 2009 (Proj.) 7.6 - Oil growth (annual percent change): 2004 0.5 | 2005 12.5 | 2006 6.8 | 2007 -17.2 | 2008 6.1 | 2009 (Proj.) 17.5 - Non-oil growth (annual percent change): 2004 5.0 | 2005 5.4 | 2006 5.9 | 2007 6.6 | 2008 5.4 | 2009 (Proj.) 3.5 - Consumer prices (end-of-period): 2004 1.1 | 2005 3.1 | 2006 8.1 | 2007 -1.7 | 2008 11.4 | 2009 (Proj.) 3.2 - Current account balance (including grants, percent of GDP): 2004 -7.3 | 2005 2.2 | 2006 1.5 | 2007 -9.3 | 2008 -1.5 | 2009 (Proj.) -14.8 - Government finance (percent of non-oil GDP where indicated): - Revenue and grants: 2004 69.9 | 2005 108.2 | 2006 141.5 | 2007 113.5 | 2008 159.3 | 2009 (Proj.) 87.4 - Oil revenue: 2004 49.7 | 2005 88.6 | 2006 120.6 | 2007 92.3 | 2008 136.0 | 2009 (Proj.) 62.7 - Non-oil primary basic balance (- = deficit): 2004 -25.9 | 2005 -29.6 | 2006 -51.3 | 2007 -55.7 | 2008 -44.3 | 2009 (Proj.) -37.3 ### Baseline macroeconomic projections and long-term assumptions (2009–29 highlights) - Average annual overall real GDP growth for 2009–29: 4.7 percent (Box 2). - Selected baseline assumptions (annual percent unless otherwise indicated; in percent of non-oil GDP where noted): - Real GDP growth: 2009–13: 6.1 | 2014–18: 3.0 | 2019–23: 4.7 | 2024–29: 4.9 - Oil real growth: 2009–13: 7.1 | 2014–18: -9.7 | 2019–23: -9.5 | 2024–29: -9.5 - Non-oil real growth: 2009–13: 5.9 | 2014–18: 6.9 | 2019–23: 6.5 | 2024–29: 5.7 - Consumer prices (end-of-period): 2009–13: 3.0 and thereafter 3.0 - Current account balance (percent of GDP): 2009–13: 0.6 | 2014–18: 0.7 | 2019–23: -9.3 | 2024–29: -15.7 - Total revenue and grants (percent of non-oil GDP): 2009–13: 130.1 | 2014–18: 97.7 | 2019–23: 60.6 | 2024–29: 45.4 - Nominal GDP (US$ billion): 2009–13: 12.1 | 2014–18: 13.2 | 2019–23: 15.5 | 2024–29: 21.3 - Oil production profile: oil production expected to peak in 2011 at 137 million barrels per year and decline to 24 million barrels per year in 2029. - Projections assume minimal external borrowing given increased oil wealth; grants assumed around 1 percent of GDP annually through 2029. ### Sensitivity analysis, scenarios, and vulnerability - Two alternative scenarios simulated (after full HIPC, additional bilateral assistance, and MDRI): - Alternative Scenario 1 — Lower oil price: assumes Congolese oil price 25 percent lower than baseline; outcome: NPV of external debt-to-revenue ratio on average higher by about 8 percentage points per year over 2009–29 relative to baseline. - Alternative Scenario 2 — Lower non-oil growth: assumes non-oil growth 2 percentage points lower than baseline; outcome: NPV of external debt-to-revenue ratio higher by about 1.5 percentage points per year over 2009–29 relative to baseline. - Under both scenarios, NPV of debt-to-revenue ratio remains below the HIPC threshold of 250 percent during the simulation period. - Staffs' view: Congo is moderately vulnerable to shocks but substantial debt relief strengthens resilience; policy actions needed to mitigate vulnerability. ### Policy recommendations and operational actions - Continue to strengthen debt management (CCA capacity, debt data security, audits). - Maintain a conservative external borrowing policy and ensure new borrowing meets PRGF concessionality requirement (minimum grant element of at least 50 percent until 2019). - Maintain fiscal discipline and increase non-oil revenue. - Implement structural reforms to safeguard long-term debt sustainability (public investment management, procurement, governance, oil sector management). - Operational follow-ups noted: - Continue consolidation of MTEF and full use of oil revenue model. - Continue strengthening SNPC internal controls and commercialization practices. - Address COMEG disbursement and inventory management issues via audit and reforms. - Secure participation of remaining creditors to finalize HIPC delivery. *Source: Executive Summary and excerpts from the IMF/IDA completion point assessment for the Republic of Congo (document _cr1077).* ### Executive Summary ...................................................................................................... ### Executive Summary ### Overview - In March 2006, the Executive Boards of IDA and the IMF agreed that the Republic of Congo (Congo) had met the requirements for reaching the decision point under the enhanced Initiative for Heavily Indebted Poor Countries (HIPC). - The amount of debt relief committed at the decision point was US$ 1,679 million in net present value (NPV) terms at the end of 2004, calculated to reduce the NPV of eligible external debt to below the threshold of 250 percent of fiscal revenue at end-2004. ### Staffs' assessment of completion point readiness - The IDA and IMF staffs consider Congo to have fulfilled all of the conditions to reach the completion point. - All key decisions, actions, and measures required to achieve the floating completion point triggers have been taken, including a satisfactory track record of implementation in: - public investment management (trigger 4.ii), - procurement (trigger 4.iii), - governance and anti-corruption (trigger 5), - improvement in the internal controls and accounting of the state-owned oil company (SNPC) (trigger 5.i), - oil commercialization (trigger 5.ii). ### Debt reconciliation and revised HIPC assistance - As a result of the debt reconciliation exercise for the completion point: - The NPV of eligible external debt at end-2004 after traditional debt relief has been revised downward from US$ 5.2 billion to US$ 5.1 billion. - The common reduction factor has declined from 32.4 percent to 31.1 percent. - Consequently the required HIPC assistance in end-2004 NPV terms has been revised downward from US$ 1,679 million at the decision point to US$ 1,575 million. - Financing assurances have been provided by creditors representing 80.6 percent of HIPC debt relief estimated at decision point. ### MDRI implications - Upon reaching the completion point under the enhanced HIPC Initiative, Congo will qualify for additional debt relief under the Multilateral Debt Relief Initiative (MDRI). - Debt relief under the MDRI would imply a stock of debt reduction of US$ 177.7 million (net of HIPC assistance) in nominal terms, saving the country US$ 201.3 million of debt service through 2043. - This additional relief would be provided via debt stock reductions at the Completion Point by: - IDA: US$ 161.2 million - AfDB: US$ 9.1 million - IMF: US$ 7.4 million ### Impact on debt burden - Full delivery of HIPC assistance together with additional bilateral assistance beyond HIPC and MDRI debt relief at the completion point would reduce Congo’s external debt burden significantly. - The NPV of debt-to-revenue ratio at end-2010 would drop to 39 percent and gradually fall over time under the baseline scenario. ### Detailed status of floating completion point triggers (summary of Box 1) - Trigger 1 (PRSP): Observed. APR submitted to Boards jointly with the Completion Point document. - Trigger 2 (Macroeconomic stability): Observed. 2nd PRGF review completed on November 30, 2009; staff’s assessment is that the 3rd review could be completed as envisaged in May 2010. - Trigger 3 (Public expenditure priorities): Observed. Relative spending on pro-poor sectors has increased. - Trigger 4 (Public finance management): - (i) Functional classification system: Observed. Budget 2009 prepared and executed with the new classification system. - (ii) Public investment management system: Observed. Public investment management action plan and selected key measures implemented. Draft 2010 investment program submitted to IDA. - (iii) Procurement code: Observed. New code adopted with application texts. New institutions established. The code has been satisfactorily implemented since October 2009. - (iv) Medium-term expenditure framework (MTEF): Observed. Main elements of MTEF prepared and used as basis for preparation of draft budget 2010. An MTEF committee was formally created, and the government adopted an oil revenue model as basis for the MTEF projection. - Trigger 5 (Governance and natural resource management): - Governance diagnostic and action plan: Observed. Institutions established and diagnostic study completed. Anti-corruption law and the anti-corruption action plan adopted and disseminated; agreed implementation steps taken. - Oil sector: - (i) SNPC internal controls and accounting: Observed. Remaining technical reservations of audits of 2006 and 2007 have been removed, in particular through the introduction of a new analytical accounting system meeting international standards, which was successfully used to produce the 2008 accounts. - (ii) Oil commercialization diagnostic and practices: Observed. A diagnostic study was completed in 2007, and an action plan adopted in 2009. Interim improvements included increasing the number of clients, ending prepayment of cargos, transferring receipts to the treasury within 15 days, adopting a new set of procedures meeting international standards, establishing an oil commercialization database, and integrating COTRADE into SNPC. A statistical analysis shows prices received by Congo on oil sales are broadly in line with those of international oil companies selling similar oil on their own behalf. - (iii) Legal text on declarations and divestiture: Observed. Statements for 2007, 2008 and 2009 were verified by Cour de Comptes and the report evaluated by the national anti-corruption committee. ### Recommendation - The staffs recommend that the Executive Directors of IDA and the IMF approve the completion point for the Republic of Congo under the enhanced HIPC Initiative. *Source: Executive Summary (Congo completion point assessment, IDA/IMF).* ### Box 1 (cont.): Status of Floating Completion Point Triggers ### _cr1077 - Box 1 (cont.): Status of Floating Completion Point Triggers ### Forestry sector - Trigger: Review of forestry sector management and legislation with IDA assistance; adoption by the government of measures recommended by the review to promote competition, transparency, and sustainable development in this sector. - Status/comments: Observed. The review was completed, the forestry code’s fiscal provisions were amended, and decrees were adopted on: - transparent competitive concession award; - environmental and social impact assessment; - resolution of conflicting usage of forest lands; - forest land gazetting procedures. - The fiscal reform package was submitted to parliament. ### Structural reform: Telecommunications - Trigger: Review and adoption of a regulatory framework for the telecommunications sector establishing competition at the level of international gateways and the wireless local loop. - Status/comments: Observed. Decree adopted on ensuring competition at the level of international gateways; new legislation on the Post and Telecommunications and law on telecom regulation adopted. ### Social sectors - Education - Trigger: Implementation during 2006 of a strategy to eliminate fictitious workers from the education budget and increase teacher staff by, at least, 1,000 each year in basic education until 2007. - Status/comments: Observed. Census recommendations implemented and more than 2000 new teachers hired. - Health - Trigger: Increase to, at least, 60 percent the share of generic drugs in total expenditures on drugs by the central purchasing agency. - Status/comments: Observed. Sufficient budget allocations were made in 2008 and 2009, although disbursements have not been timely. An audit to improve execution is planned. - HIV/AIDS - Trigger: Increase in the number of voluntary AIDS counseling and testing centers with associated measures (staff, equipment, and awareness campaign) from 4 at present to, at least, 10 in 2006 and 15 in 2007. - Status/comments: Observed. There are about 60 testing centers currently. ### External debt management - Trigger (i): Publication of the quarterly external debt data and projections on a government website. - Status/comments: Observed. Quarterly data and projections are available on the Ministry of Finance, Budget, and Public Portfolio web-site. - Trigger (ii): Centralization of all information on debt, including collateralized debt, in the government’s debt agency (CCA). - Status/comments: Observed. All information on debt centralized in the CCA. ### A. PRSP and Poverty Monitoring - Trigger: Preparation of a full PRSP through a participatory process and satisfactory implementation of its recommended actions for at least one year, as evidenced by an Annual Progress Report (APR) submitted by the government to the staffs of IDA and IMF. - Status/comments: - Staffs consider this trigger as met, since a full PRSP was adopted in April 2008 and satisfactorily implemented since then. - The PRSP’s main elements include the need to: (i) improve governance and consolidate peace and security; (ii) promote growth and macroeconomic stability; (iii) enhance access to basic social services; (iv) improve the social environment and integration of vulnerable groups into society; and (v) combat HIV/AIDS. - The PRSP was prepared through broad consultations with stakeholders from civil society, NGOs, and the private sector; the JSAN commended the comprehensive poverty diagnosis. - The 2006 poverty assessment (based on the 2005 poverty survey) found: - just over 50 percent of Congolese households live below the poverty line; - highest poverty incidence in semi-urban and rural areas; - almost 60 percent of poor households are headed by women. - A new assessment has been launched, including a second poverty survey aimed at producing comparable household and expenditure data. - Statistical capacity-strengthening measures: adoption of a new statistical framework law in July 2009; a new statistics strategy is being prepared to operationalize the law. - The 2009 APR was adopted by the government in August 2009 and circulated to the Fund and IDA Boards. The JSAN notes continued PRSP progress despite the global financial crisis and highlights structural reforms: adoption of a new procurement code, introduction of an MTEF, and a simplified expenditure chain. ### B. Macroeconomic Performance - Trigger: Maintenance of macroeconomic stability as evidenced by satisfactory performance under the PRGF-supported program as well as any IMF successor program. - Status/comments: - Staffs consider this trigger as met; performance under the PRGF arrangement has been satisfactory since its approval in December 2008. - The completion of the second review on November 30, 2009 and the program remaining on track provide a track record of satisfactory performance. - Overall real GDP growth is expected to expand by about 7½ percent this year increasing to double digits next year, alongside the recovery of the world economy and higher oil production from new fields. - Inflation has been above the CEMAC convergence criteria during the past year or more but is trending downward and is projected to fall to about 3 percent by the end of 2010. - Preliminary fiscal data for end-November 2009 indicate the program remains on track; the third PRGF review is expected to be completed as envisaged in May 2010. - Budget overruns at end-September (equivalent to about 2.6 percent of non-oil GDP) were addressed by end-November through: - strong non-oil tax revenue collections; - a stoppage in spending authorizations in mid-November allowing only non-discretionary payments; - drawdown of HIPC resources to finance capital expenditure. - The non-oil primary fiscal deficit was slightly below the program path at end-November (by about CFAF 4 billion); staff projects under-execution of the budget to continue through December, enabling achievement of the program’s year-end performance criterion, excluding any outlays to address a refugee crisis. - The fiscal position improved since decision point: basic non-oil primary deficit reached 55.7 percent of non-oil GDP in 2007 and is projected at about 37.3 percent of non-oil GDP in 2009. - Selected macroeconomic indicators, 2004–2009 (as presented) - Economic growth and prices (Annual percentage change, unless otherwise indicated) - Real GDP: 2004 3.5 | 2005 7.8 | 2006 6.2 | 2007 -1.6 | 2008 5.6 | 2009 (Proj.) 7.6 - Oil: 2004 0.5 | 2005 12.5 | 2006 6.8 | 2007 -17.2 | 2008 6.1 | 2009 (Proj.) 17.5 - Non-oil: 2004 5.0 | 2005 5.4 | 2006 5.9 | 2007 6.6 | 2008 5.4 | 2009 (Proj.) 3.5 - Consumer prices (end-of-period): 2004 1.1 | 2005 3.1 | 2006 8.1 | 2007 -1.7 | 2008 11.4 | 2009 (Proj.) 3.2 - External sector (Annual percentage change, unless otherwise indicated) - Exports, f.o.b (CFA francs): 2004 4.9 | 2005 53.8 | 2006 30.0 | 2007 -12.3 | 2008 24.0 | 2009 (Proj.) -20.1 - Imports, f.o.b (CFA francs): 2004 16.4 | 2005 34.3 | 2006 42.9 | 2007 5.1 | 2008 24.7 | 2009 (Proj.) -8.7 - Export volume: 2004 -1.5 | 2005 12.1 | 2006 5.4 | 2007 -16.9 | 2008 7.2 | 2009 (Proj.) 16.1 - Import volume: 2004 12.1 | 2005 20.0 | 2006 32.2 | 2007 4.2 | 2008 15.2 | 2009 (Proj.) 1.9 - Current account balance (including grants, in percent of GDP): 2004 -7.3 | 2005 2.2 | 2006 1.5 | 2007 -9.3 | 2008 -1.5 | 2009 (Proj.) -14.8 - Government finance (Percent of non-oil GDP where indicated) - Revenue and grants: 2004 69.9 | 2005 108.2 | 2006 141.5 | 2007 113.5 | 2008 159.3 | 2009 (Proj.) 87.4 - Oil revenue: 2004 49.7 | 2005 88.6 | 2006 120.6 | 2007 92.3 | 2008 136.0 | 2009 (Proj.) 62.7 - Non-oil revenue and grants: 2004 19.5 | 2005 19.6 | 2006 20.9 | 2007 21.2 | 2008 23.3 | 2009 (Proj.) 24.7 - Total expenditure: 2004 61.6 | 2005 67.4 | 2006 88.8 | 2007 86.3 | 2008 79.5 | 2009 (Proj.) 71.5 - Overall balance (including grants, commitment basis): 2004 8.4 | 2005 40.8 | 2006 52.7 | 2007 27.1 | 2008 79.8 | 2009 (Proj.) 15.9 - Non-oil primary basic balance (- = deficit): 2004 -25.9 | 2005 -29.6 | 2006 -51.3 | 2007 -55.7 | 2008 -44.3 | 2009 (Proj.) -37.3 - Sources: Congolese authorities; and Fund staff estimates and projections. - Note: (Annual percentage change, unless otherwise indicated) (Percent of non-oil GDP) - Refugee crisis risk note: - UN estimates that more than 90,000 people have entered Congo to avoid ethnic violence in the Democratic Republic of Congo. - Through the end of November, CFAF 2 billion has been disbursed to address the situation. ### C. Public Expenditure Prioritization - Trigger: Alignment of public spending priorities in accordance with the priorities identified in the I-PRSP, and, when completed, the PRSP, reflecting emphasis on pro-poor growth. - Status/comments: - Staffs consider this trigger as met; public spending is now better aligned with PRSP priorities. - Pro-poor expenditure increased from 4.1 percent of GDP in 2003 to 7.0 percent in 2008. - The proportion of pro-poor expenditure in total public expenditure increased from 13.8 percent in 2003 to 27.2 percent in 2008. - Spending on power, water, sanitation, and infrastructure increased from 1.8 percent of GDP in 2005 to 3.4 percent in 2008. - Envelope for basic health and education rose from 2.1 percent of GDP to 2.8 percent between 2005 and 2008. - Use of HIPC resources for public spending commenced in late 2008; these resources have been used to finance pro-growth and pro-poor spending in line with the Initiative. - Text Table 2. Republic of Congo: Pro-poor Expenditure, 2003–08 (in percent of GDP) - Basic health and HIV/AIDS: 2003 0.2 | 2004 0.4 | 2005 0.6 | 2006 1.0 | 2007 0.9 | 2008 1.2 - Basic education: 2003 1.7 | 2004 1.5 | 2005 1.5 | 2006 1.4 | 2007 1.6 | 2008 1.7 - Infrastructure: 2003 0.3 | 2004 1.2 | 2005 1.2 | 2006 1.2 | 2007 1.6 | 2008 2.4 - Power, water and sanitation: 2003 0.9 | 2004 0.3 | 2005 0.6 | 2006 1.1 | 2007 2.3 | 2008 1.1 - DDR and food for soldiers: 2003 0.9 | 2004 0.7 | 2005 0.7 | 2006 0.8 | 2007 1.5 | 2008 0.7 - Employment and social protection: 2003 0.1 | 2004 0.1 | 2005 0.1 | 2006 0.1 | 2007 0.1 | 2008 0.0 - Agriculture: 2003 0.0 | 2004 0.0 | 2005 0.1 | 2006 0.1 | 2007 0.1 | 2008 0.1 - Total: 2003 4.1 | 2004 4.2 | 2005 4.8 | 2006 5.7 | 2007 8.0 | 2008 7.0 - Memorandum item: GDP (in billions of CFA): 2003 2,032 | 2004 2,456 | 2005 3,211 | 2006 4,043 | 2007 3,664 | 2008 4,802 - Text Table 3. Republic of Congo: Pro-poor Expenditure, 2003–08 (in percent of total public expenditure) - Basic health and HIV/AIDS: 2003 0.7 | 2004 1.5 | 2005 2.4 | 2006 3.5 | 2007 2.8 | 2008 4.6 - Basic education: 2003 5.6 | 2004 5.6 | 2005 6.2 | 2006 5.3 | 2007 4.9 | 2008 6.4 - Infrastructure: 2003 1.0 | 2004 4.5 | 2005 5.2 | 2006 4.4 | 2007 4.9 | 2008 9.3 - Power, water and sanitation: 2003 3.1 | 2004 1.2 | 2005 2.8 | 2006 4.1 | 2007 7.0 | 2008 4.1 - DDR and food for soldiers: 2003 3.0 | 2004 2.6 | 2005 3.2 | 2006 2.8 | 2007 4.6 | 2008 2.7 - Employment and social protection: 2003 0.4 | 2004 0.2 | 2005 0.4 | 2006 0.2 | 2007 0.2 | 2008 0.1 - Agriculture: 2003 0.0 | 2004 0.1 | 2005 0.5 | 2006 0.4 | 2007 0.2 | 2008 0.6 - Total: 2003 13.8 | 2004 15.7 | 2005 20.7 | 2006 20.7 | 2007 24.4 | 2008 27.2 - Memorandum item: Total public expenditure (in billions of CFAF): 2003 604 | 2004 657 | 2005 745 | 2006 1,113 | 2007 1,201 | 2008 1,238 - HIPC special Treasury account: - Accumulated balance at end-2008: CFAF 45.9 billion (about US$ 104 million). - In 2008 the Government allocated CFAF 25 billion of these funds through the 2008 supplemental budget; CFAF 7 billion were actually disbursed at end-year. - In the 2009 budget, the interim HIPC relief allocation increased to CFAF 37 billion, composed of CFAF 19 billion for new projects and CFAF 18 billion for the unused budget in 2008 that was brought forward. - Audits: initial audit covering March 2006 to August 2007 revealed no major problems; second audit covering September 2007 to December 2008 found savings generally in order and confirmed proper utilization; recommended more regular record keeping on savings realized from debt relief. ### D. Public Financial Management - Status/comments: - Staffs consider triggers in this area have been met. - Adoption in 2008 of a Public Financial Management Improvement Action Plan (PAGGFP) and a Public Investment Management Action Plan (PAGGIP). - Adoption of a decree supporting the rationalization of budget execution procedures (expenditure chain) to strengthen reform; will be developed through computerization of the main elements of the public financial management system. - A reform of the payment system (Treasury) is under design. - Budget Classification - Trigger: Establishment of a functional classification system for government expenditures, including poverty related expenditures, consistent with the IMF’s Government Finance Statistics manual, and preparation of government budgets using this new classification. - Status/comments: Staffs consider this trigger as met. A functional classification system was fully effective at the beginning of this year and was used for preparing and executing the 2009 budget. The classification was reformed with technical assistance from the IMF and is consistent with the Fund’s 2001 Government Finance Statistics manual. The new classification system has been implemented at all levels of government. - Public Investment Management - Trigger: Implementation of a new public investment management system to provide rigorous selection, and efficient execution and monitoring of the projects; submission of draft public investment programs to IDA for review. - (Status/comments beyond this trigger are not included in the supplied content.) *Source: _cr1077 - Box 1 (cont.): Status of Floating Completion Point Triggers* ### 22. On the basis of the implementation record of the public investment management ### On the basis of the implementation record of the public investment management reform ### Public investment management — status and reforms - Trigger considered met on the basis of the implementation record of the public investment management reform. - Authorities have put in place basic reform elements to appraise and select projects on expected economic and social costs and benefits, transparently and effectively implement the public investment budget, and closely monitor budget implementation and project execution. - Ongoing needs: continue reform efforts, particularly building institutional and human capacity. - December 2008: Government adopted a public investment management action plan based on a detailed assessment and an in-depth audit of the public investment budget execution in 2006. - Action plan principles: - Clarify roles and responsibilities of different actors in public investment management, notably a gradual decentralization to provide sector ministries increased authority. - Introduce strategic selection of public investment projects via appraisals objectively assessing economic, social and environmental costs and benefits. - Integrate the public investment budget with the overall budget process through the MTEF to strengthen multi-year planning. - Strengthen transparency and effectiveness in execution of public investments through procurement and expenditure chain reforms. - Priority actions implemented in 2009: - Decree adopted in August 2009 clarifying the role of Directors of Planning (DEP) in sector ministries, strengthening DEP role in investment budget programming, project elaboration, appraisal, monitoring and implementation. - Indicative new budget calendar adopted in August 2009 including preparation for the tri-annual public investment program. - New project appraisal and selection system introduced via a circular from the Minister of Planning; appraisals require: - i) project objectives consistent with national development objectives, - ii) technical feasibility considering available resources, - iii) detailed cost estimates and evidence of least-cost option, - iv) consideration of socio-economic returns and social and environmental impact, - v) a credible implementation plan. - Project appraisals standardized with flexibility for project size and complexity. - Project evaluation fund established; design and institutional anchoring adopted; fund to be in place in early 2010 for the 2011 project pipeline. - Government met commitment to provide allocations for project appraisals in the 2009 and 2010 budgets and to subject all new projects larger than CFAF 500 million included in the draft 2010 budget to a technical and economic feasibility study. - A report on implementation of the investment budget in the first semester of 2009 revealed significant improvements in respecting budget guidelines. - Draft public investment budgets submitted to IDA annually since 2007; staffs’ comments taken into account and were particularly effective for 2009 and 2010 budgets. ### Procurement - Trigger (adoption and satisfactory implementation of a new procurement code aligned with international best practice) considered met. - New procurement code adopted in May 2009 with legal and regulatory framework in line with international best practice. - Administrative and institutional support established: - Relevant secondary legal acts prepared. - Creation and staffing of a general public procurement directorate (DGCMP). - Regulatory authority (ARMP) created to oversee procurement. - Contract management authority established to handle large and complex contracts. - Administrative elements completed: - Operational unit of regulatory body, general directorate and bidders’ complaint unit in place. - Procurement units set up in five line ministries including Education, Health and Agriculture; these units equipped and staffed. - Implementation support: - Manual of procedures for executing agencies, standard bidding documents, and description of general conditions of contracts prepared. - Training program underway; all key staff in new procurement institutions in position. - Director General of the procurement agency appointed as required; three key technical directors recruited; over 100 trainers trained in new procedures. - Performance evidence: - Capacity of procurement agency judged satisfactory in processing time and compliance with standards, demonstrated by tendering of three contracts through the new system; these awards made in full conformity with the new code. - More than 300 contracts were sent back to procuring ministries/agencies by the Director General for non-compliance with the new code. ### Medium Term Expenditure Framework (MTEF) - Trigger (adoption of an MTEF for sustainable management of government expenditures and revenues with IDA and IMF technical assistance) considered met. - Main elements of a full MTEF in place and used to prepare the 2010 budget. - Recent developments: - Adjustments to the MTEF to ensure consistency with the macroeconomic framework underlying the PRGF arrangement and the draft 2010 budget. - A technical committee comprising members of the Ministries of Planning and Finance and the BEAC established to prepare the macroeconomic framework (in consultation with Fund staff). - Central MTEF prepared with indicative allocations for all sectors over the next three years; attached to the APR to translate PRSP priorities into budgetary allocations. - Sector MTEFs developed beyond expectations: sector-specific policy objectives, indicators with targets, and lists of priority programs broken down into activities with cost estimates. Initial sectors: education, health, transport, agriculture; extended to all major ministries (20 in total). Detailed strategies and program costs need further development; such strategies exist in education, health, and transport. - New oil revenue model developed by international experts using field reserves, production profiles, operating costs and oil prices; model simulates and forecasts gross oil revenue, crude oil transfers to state-owned refinery for domestic supply, SNPC costs to estimate net state revenue, and projection of debt payments. - Implementation of the oil model: team set up to install and manage model; core government team received extensive training and can operate the model; training to continue and be extended to a wider group. - Main challenge ahead: further consolidation so the MTEF informs all future budgets, including refining sector MTEFs and full use of the oil revenue model; making the inter-ministerial and technical committee permanent could facilitate efforts. ### Governance and anti-corruption - Trigger (completion of diagnostic governance and corruption study; establishment of national anti-corruption committee; adoption and sustained implementation of an action plan; assessment by IDA/IMF based on independent review) considered met. - Institutional developments: - Governmental Anti-corruption Commission established based on terms of reference agreed with IDA and IMF staffs; initially at Prime Minister level, now under the Presidency. Mandate: formulation, coordination and implementation of anti-corruption strategy. - Independent Anti-Corruption Observatory established by law in September 2007; members nominated by decree in October 2007. Chair: representative of ecumenical churches; more than half membership from civil society (including trade unions and EITI committee). - Observatory mandate: review governmental initiatives related to governance and corruption, audits of state-owned enterprises, procedures for issuing natural resource concessions; able to perform mandate independently and critically assess anti-corruption strategy. - Both Commission and Observatory have permanent secretariats; Observatory offices being upgraded. - Operational expenditures appropriated in 2008 and 2009 budgets, but disbursements not made in a timely manner. - Diagnostic study and action plan: - February 2009: diagnostic study on governance and corruption completed by a firm of international reputation; served as basis for Anti-Corruption action plan. - Action plan adopted August 2009 and is being implemented, including a communication program. - Action plan reviewed by an international expert in March 2009 and found satisfactory. - Five sectors identified as most at risk: oil production and marketing, forestry, public financial management, justice and police, and the social sectors; action plan addresses each sector with actions, timetable and implementation criteria. - Anti-Corruption Law adopted by Parliament in August 2009; prepared by an international firm under the Commission's supervision; penal in nature and aligns Congolese legislation with international best practices. - Observatory activities and monitoring: - Observatory has reviewed and issued official opinions on procurement code and secondary legislation; Governance Diagnostic Study; Governance and Anti-Corruption Action Plan and Anti-Corruption Law (including first 3 months of implementation); SNPC audits for 2006 and 2007; action plan on Oil Commercialization and commercialization procedures; conflict of interest declarations of SNPC’s management. - Observatory to monitor application of procurement code, implementation of the Anti-Corruption action plan, application of the Anti-Corruption Law, and implementation of oil commercialization action plan by SNPC. - Implementation verification: - Anti-corruption action plan implemented satisfactorily: anti-corruption law fully in force; Observatory consulted on specified documents; awareness campaign undertaken for senior government officials and the population. ### Oil sector governance — SNPC accounts and commercialization - Audit of SNPC accounts — trigger considered met: - Annual audits show improvement in SNPC internal controls with reduction in number and severity of reservations. - SNPC actions: accurately valuing assets from predecessor Hydro-Congo, restructuring to reduce subsidiaries, introduction of a new analytical accounting system. - 2006 and 2007 external audits (by an internationally reputed audit firm and certified by national anti-corruption committee) completed and posted on MEFB website with SNPC management comments; audits show relative progress but remain qualified. - Qualifications relate to accounting standards and procedures, internal controls, management of bank accounts and reporting—mostly in joint-venture operations and financial relations between SNPC and central government. - Previously unsubstantiated legal fees clarified. - New analytical accounting system used to prepare 2008 financial statements; 2008 audit launched and expected to be completed by early 2010; draft audit report shared with staffs confirms significant improvement. - Continued efforts needed to strengthen internal control system. - Oil commercialization — trigger considered met: - Major improvements in oil marketing practices and governance since 2005. - Settlement with litigating creditors with validated claims enabled COTRADE (SNPC’s oil trading subsidiary) to return to more transparent, market-driven commercialization and timely repatriation of oil revenue to the Treasury. - Elimination of prepayment-for-cargo practice reduced oil marketing costs. - Number of regular clients increased from 4 in 2005 to 14 in 2009. - COTRADE and SNPC now transfer revenue on the basis of realized prices rather than the fiscal price; transfers to the Treasury made within 15 days of receipts. - Transfers reconciled with budget data and certified quarterly by an international auditing firm and posted on the government’s website. *Source: _cr1077 - 22. On the basis of the implementation record of the public investment management reform* ### 42. A diagnostic study on oil commercialization was completed in March 2007. This ### _cr1077 - 42. A diagnostic study on oil commercialization was completed in March 2007. This ### Oil commercialization: study, action plan, and implementation - A diagnostic study on oil commercialization was completed in March 2007; it was published on the government’s website and submitted to the IMF and IDA for comments. - The government developed an action plan based on the study; the initial plan failed to address key commercialization practice issues. - An international expert was recruited; an action plan acceptable to the staffs was adopted in May 2009. - The May 2009 version of the plan was reviewed and accepted by the Anti-Corruption Commission and Observatory as envisaged under this HIPC trigger. - The action plan contains measures to be undertaken by SNPC and its subsidiary COTRADE directly, as well as administrative measures and studies requiring an oil-trading consultant firm. Key actions completed (as described in the action plan) - Adoption of amendments to current oil marketing procedures addressing three recommendations from an international consulting firm: the further strengthening of the codification of marketing procedures, tightening client selection procedures, and task separation in the marketing process. - Establishment of a commercialization database and adoption of measures to strengthen it as a tool for decision-making and modeling of Congolese crude oil prices. - Adoption of a formal internal reporting system and a training program. - Integration of COTRADE as department into the national oil company to ensure improvements in SNPC’s accounting and control systems carry over to the oil commercialization department. Statistical analysis and price competitiveness - Staffs undertook a statistical analysis of price differentials to ascertain whether Congolese oil sold by government trades at competitive and fair market prices. - Based on available data (noting the commercialization database needs further population), prices received by SNPC for oil sold (Djeno and Nkossa) on behalf of the government are broadly in line with those obtained by international oil companies active in Congo (and selling oil on their own behalf). - Staffs compared SNPC's realizations with prices officially posted for Cabinda and Bonny Light; SNPC's sales were broadly within or not far off the trading bandwidth of these proxies. - Limitations: unobserved differences in quality, traded volumes, and marketing between the proxies and Congolese oil may impact relative prices; international oil companies could sell to their affiliates, affecting competitiveness signals. - The analysis shows a general improvement in the price differentials between Congolese oil and Brent since 2006, consistent with trends for crude oil sold by international oil companies active in Congo. - Observations: oil marketing is a dynamic learning process; building on current procedures Congo could further adapt trading techniques and strategies to international markets to improve obtained prices over time. ### Declaration of interests by members of the SNPC board and management - Government adoption and application, certified by the national Anti-Corruption Commission during the completion of audits referenced in 5(i) and 5(ii), of a legal text stipulating: - compulsory declaration, to the National Auditing Office (Cour des Comptes), by members of the Executive Board of SNPC and those having a management mandate within SNPC and its subsidiaries, at the moment of their nomination and annually thereafter, of their participation or other interests in companies having business relations with SNPC or its subsidiaries as well as the verification and annual publication of the aforementioned declarations by the National Auditing Office (Cour des Comptes). - divestiture by members of the Executive Board of SNPC and by those having management responsibilities within SNPC or any of its subsidiaries of such participations and/or other interests, within a time period of 6 months after their nomination and prohibition of the taking of any interest in companies having business relations with SNPC during the period of their mandate. - Staffs consider this trigger met since 2006, when the government issued Decree No. 2006-32 on prevention and resolution of conflicts of interest for SNPC Board and senior managers. - Subsequently, all board members and managers presented declarations to the National Auditing Office confirming no share or interest in any company that has relations with SNPC. - The National Auditing Office assessed potential conflicts and its reports for 2007, 2008 and 2009 confirmed that there are no cases of conflict of interest. ### Forestry sector governance: review, legislation, and measures - Staffs consider the forestry trigger met: government completed a comprehensive and participatory forest and environmental sector review and began implementing major recommendations. - Adopted presidential decrees in September 2009 assessed satisfactory by IDA and IMF staffs: - A decree on forest concessions allowing greater competition and transparency in their award. - A decree on social and environmental impact assessment providing full environmental and social assessment for projects in forest areas. - A decree on gazetting forest lands enhancing the process, including through local consultations. - A decree on contradictory use of forest lands to address cases where concessions or permits were issued for conflicting uses (e.g., mining permits in national parks). - Submission to Parliament of a legal package on forest taxation (passed as an amendment to the Forest Law) aimed at improving resource sustainability, fiscal revenue, and sector economic performance. Legislative changes include: - Change of the basis of the export tax assessment from free-on-board to an ex-works or free-on-truck basis to account for transport costs and facilitate diversification of harvests. - Indexing of the forest concession area tax on the productive surface as set by an agreed forest management plan; concessions without an agreed management plan will pay the tax for the full granted area. - Transferability of log export rights (“quotas”) between forest enterprises on the basis of the initial allocation of 85/15 (85 percent of the log production should be transformed in Congo, 15 percent can be exported as raw logs). - Removal of the ‘surtaxe’ (surcharge) for companies exporting more than the 15 percent of log export rights. - Amendment correcting inconsistency between the Forestry Law (2002) and 2004 legislation creating the Roads Fund: the 2002 Forestry Law now stipulates that 50 percent of the surface tax is allocated to the Roads Fund rather than local governments. The report notes potential questions about whether this allocation meets decentralized development financing needs but states it does not impede proceeding to the HIPC completion point. ### Structural reforms: telecommunications regulatory framework - Staffs consider the telecom reform trigger met; necessary legal reforms were adopted and implemented. - Agreed actions to meet trigger: (i) full and unambiguous repeal of Decree no 2004-466 reserving international gateway services and the wireless local loop to SOTELCO; (ii) complete revision of the telecommunications package and adoption of new sectoral telecommunications/postal laws to set up an independent regulatory authority and ensure clear and transparent regulatory regime. - The first part was met with two Presidential Decrees published in March 2008: - One decree set conditions of management of frequency spectrum consistent with best international practice. - The other decree repealed unambiguously Decree 466 of October 2004 and restored monopoly powers on international gateway. - The second part was completed with adoption by Parliament of a new legal framework for postal and telecom sectors in August 2009; with international consultant support, the government prepared: - a law instituting a regulatory agency for the sector, - a law on the regulation of the electronic communications sector, - a law on the regulation of the Postal Sector. - IDA staff comments on draft laws were incorporated. ### Social sector reforms Education sector - Trigger: implementation during 2006 of a strategy to eliminate fictitious workers from the education budget and increase teacher staff by, at least, 1,000 each year in basic education until 2007. - Staffs consider triggers met. - Teacher recruitment: - Since 2007, authorities recruited 1,618 primary school teachers. - Recruitment of a further 2,000 is projected for this year, of which 561 had been recruited through September. - The total recruitment already exceeds the 2,000 teachers to be hired as per trigger definition. - Ghost workers: - The 2006 census and verification uncovered 5,163 ghost workers, equivalent to about 22 percent of total staff. - Of these, 3,717 were identified as working at other state institutions; remaining 1,446 unidentified staff were removed from the wage bill as envisaged. - Removal created openings for new teachers. HIV/AIDS - Trigger: increase voluntary AIDS counseling and testing centers from 4 to at least 10 in 2006 and 15 in 2007, with associated measures. - Staffs consider this trigger met. - Centers providing reliable and standardized testing and counseling services increased from two in 2004 to 59 in 2008. - It is anticipated the number of centers will increase to 99 in 2012. Health sector - Trigger: increase to at least 60 percent the share of generic drugs in total expenditures on drugs by the central purchasing agency (COMEG). - Staffs consider this trigger met: budget included a separate allocation for generic drugs to be purchased through COMEG since 2008; 2009 budget continued this practice. - Disbursement issues: - Disbursement for anti-retroviral drugs about CFAF 747 million, compared with the budgeted allocation of CFAF 3 billion. - For other drugs, a single disbursement of CFAF 500 million in mid-September 2009, compared with about CFAF 7 billion allocated in the 2009 budget. - Two COMEG requests for payment (first and second quarter 2009 titles) are pending at the Ministry of Finance due to perceived problems in inventory management and procedures for purchases of pharmaceuticals. - Government plans: - Launch a general audit of COMEG to streamline budgetary resources and enhance inventory management systems. - Rationale: prevent repetition of 2008 when a large quantity of drugs had to be destroyed as past expiry; timely disbursements are imperative to avoid stock-outs of generic medicines and anti-retroviral drugs. ### Debt management - Triggers: publication of quarterly external debt data and projections on a government website; centralization of all information on debt, including collateralized debt, in the government’s debt agency (CCA). - Staffs consider debt management triggers met. - External debt stock and debt service projections provided on the Ministry of Finance, Budget, and Public Portfolio’s website quarterly, including latest information through end-September 2009. - Data produced by Caisse Congolaise d’Amortissement (CCA) using DEMFAS (computerized debt management system). - All external debt contracted by government entities, including SNPC and other state enterprises, are included in the debt data registered and monitored by the CCA. - Ongoing enhancement program based on a debt management diagnosis with World Bank and BEAC technical assistance and a national debt strategy in line with CEMAC regional guidelines; objectives: - (i) strengthen basic debt management functions: collection, filing, presentation of debt data, and internal/external control environment; - (ii) move toward a more strategic approach to debt management, including issuance of Treasury bills. ### Updated debt relief and debt sustainability analysis — Data reconciliation - The debt stock at end-December 2004 has been revised downward relative to the decision point estimate. - Reconciliation with authorities covered more than 80 percent of the debt stock at end-2004 against creditor statements and supplemental sources. - Revised nominal debt stock at end-2004 declined from US$ 9.3 billion to US$ 9.2 billion. - NPV of debt after delivery of traditional debt relief decreased by US$ 105 million to US$ 5.1 billion (Table 1). - Central government revenue reported at end-2004 (used to calculate HIPC assistance at decision point) has not been revised. Reconciliation results by creditor type - Multilateral creditors: no significant revisions to the decision point database. - Paris Club creditors: - NPV of the Paris Club debt revised downward slightly. - As of end-December 2004 the NPV of the Paris Club debt stands at US$ 4.9 billion (54.6 percent of the NPV of total external debt), compared with the decision point estimate of US$ 5 billion. - Primary Paris Club creditors at completion point would be France (33.8 percent of the NPV of total external debt) and Spain (3.8 percent of the NPV of total external debt). - Other bilateral creditors: - As of end-December 2004 the NPV of debt owed to non-Paris Club creditors was US$ 291 million (equivalent to 3 percent of the NPV of total external debt). - This amount was revised upward by US$ 10 million in 2004 NPV terms from the decision point estimate mainly due to changes in principal arrears to Angola. - Commercial creditors: - As of end-December 2004 the NPV of debt owed to commercial creditors was US$ 3.4 billion (38 percent of the NPV of total external debt), of which the London Club creditors held US$ 1.8 billion. - Revisions reflect that some loans were sold to non-London Club creditors and were not included in the 2007 London Club agreement with Congo; these loans went into litigation. - Total outstanding loans held by commercial creditors remained the same, although some holders changed from London Club to non-London Club creditors. Recalculation of HIPC assistance - Downward revision of end-December 2004 NPV of debt after traditional debt relief from US$ 5.2 billion to US$ 5.1 billion results in a common reduction factor of 31.1 percent, compared with 32.4 percent committed by creditors at decision point. - The recalculation of assistance follows policy rules and is above the minimum threshold (a change in the US dollar amount of HIPC relief of 1 percent of the targeted NPV of debt after HIPC relief) for adjusting the common reduction factor in response to new information. - Staffs recommend that HIPC Initiative debt relief estimated at US$ 1,679 million in NPV terms at the decision point be reduced to US$ 1,575 million (Table 2). *Source: IMF staff report content provided in the supplied PDF excerpt.* ### 63. Congo has received financing assurances of participation in the enhanced HIPC ### _cr1077 - 63. Congo has received financing assurances of participation in the enhanced HIPC ### Creditor participation and HIPC assurances - Congo has received financing assurances of participation in the enhanced HIPC Initiative from creditors holding 80.6 percent of the NPV of HIPC assistance estimated at the decision point. - Multilateral and Paris Club creditors have confirmed their participation in the HIPC Initiative. - Some non-Paris Club official bilateral and commercial creditors including the London Club creditors have already signed agreements in the interim period providing their share of debt relief. - The staffs have encouraged the authorities to use concerted effort toward securing the participation of the remaining creditors. ### Total HIPC debt relief and composition - Congo is expected to receive about US$ 1.575 billion of total HIPC debt relief in end-December 2004 NPV terms at the completion point. - Composition of the US$ 1.575 billion: - Bilateral creditors: 57 percent - Commercial creditors: 36 percent - Multilateral creditors: 7 percent ### Multilateral creditors — commitments and interim assistance - Total amount of HIPC assistance committed by Congo’s multilateral creditors at the decision point: US$ 117.7 million in end-2004 NPV terms, revised downwards to US$ 112.9 (about 7.2 percent of HIPC debt relief). - IDA, the IMF, and the European Union provided interim HIPC assistance amounting to US$24.1 million in nominal terms through end-2009. IDA specifics - Debt relief from IDA: US$ 47 million in end-2004 NPV terms, revised downward from US$ 49 million as determined at the decision point. - IDA interim delivery: US$ 13.1 million in NPV terms (US$ 14.4 million in nominal terms) via a 50 percent reduction of debt service falling due during the interim period through February 2010. - IDA completion point delivery: remaining US$ 33.9 million in end-2004 NPV terms through a 50 percent reduction of debt service on eligible debt through the end of 2020. IMF specifics - IMF committed HIPC assistance at decision point: SDR 5.637 million (equivalent to about US$ 8.971 million) in NPV terms. - Revised IMF HIPC assistance at decision point: SDR 5.395 million (equivalent to about US$ 8.586 million) in NPV terms. - IMF interim HIPC assistance already provided: SDR 0.9 million (equivalent to about US$1.4 million) in two tranches in December 2008 and December 2009. - IMF completion point delivery: stock-of-debt operation estimated at SDR 4.5 million in NPV terms (equivalent to about SDR 5.4 million in nominal terms). AfDB Group and EU - AfDB Group committed at decision point: US$ 42 million in end-2004 NPV terms; more than the full amount was provided via cancellation of arrears in 2004–05, so AfDB Group is not obligated to provide additional HIPC relief at the completion point. - EU committed at decision point: US$ 9.4 million in end-2004 NPV terms; provided approximately US$ 9 million in NPV terms (about US$ 10.6 million) of relief during the interim period. - EU’s share revised downwards by about US$ 0.4 million in NPV terms due to the downward revision of the common reduction factor. Other multilaterals - BADEA and OFID provided part of their shares via concessional restructurings and rescheduling; they will provide the balance at the completion point. - IFAD will provide debt relief only at the completion point. ### Paris Club, non-Paris bilateral, and commercial creditors - Paris Club creditors have agreed in principle to provide assistance amounting to about US$ 3.0 billion in end-2004 NPV terms, expected to be delivered through a stock-of-debt reduction under Cologne terms. - Paris Club assistance breakdown noted: traditional relief of US$ 2,177 million, and HIPC relief of US$ 837 million in 2004 NPV terms. - Bilateral agreements implementing the December 2008 Paris Club minutes have been signed with the exception of Brazil, UK and Russia. - Congo has a single ODA loan administered by IDA that has been re-scheduled with the provision that it will be cancelled on reaching completion point. Non-Paris Club bilateral creditors - Authorities have signed bilateral agreements in the interim period with Bulgaria, China, Cuba, Libya, and Romania. - Negotiations ongoing with Kuwait, UAE, Saudi Arabia, Angola, and Algeria. - Notes on specific creditors: - Bulgaria, Libya and Romania have canceled approximately 78-80 percent of their claims and Congo has paid off the remaining balance. - China has provided 100 percent debt relief on some of its claims in the interim period. - Loans from Cuba were repaid (with no relief provided). Commercial creditors - Congo negotiated a commercial debt restructuring agreement with London Club creditors in November 2007. - Principal of total eligible debt as of November 2007: US$ 310 million. - Creditors holding 92 percent of this eligible debt participated in the agreement. - Agreement included issuance of US$ 477 million of Eurobonds maturing in 2029. - Non-London Club commercial creditors: - Commercial creditors holding US$ 282 million of external debt as of end-December 2004 NPV terms have provided debt relief by cancellations and rescheduling. - This group holds approximately 20 percent of total debt in end-2004 NPV terms. ### Litigating creditors, settlement, and data reconciliation - Congo settled a dispute at end-2008 with litigating creditors through payments totaling US$ 939 million (about 9 percent of GDP). - At that point, three outstanding litigating creditors had claims totaling US$ 393 million. - The settlement terms were significantly less favorable than those of HIPC, with a discount factor calculated at 37 percent (down from an earlier incorrectly reported 79 percent). - The lower discount factor was attributed to inclusion of some debts covered by the London Club agreement as part of claims held by litigating creditors. - After correcting the error, outstanding debt was revised downward, but total settlement to those creditors remained the same. - Authorities identified actions to prevent future mistakes: - Restructuring of the debt unit by separating tasks for entry/recoding and verification of data. - Training in risk management to improve security and control of data. - Conducting regular audits of information/data to ensure accuracy. - Creating a legal affairs unit. - Due to a confidentiality clause in the agreement, the authorities have not provided source information that would allow the staff to reconcile the related debt information and the discount factor. ### Debt outlook after HIPC assistance (end-2008) - Nominal stock of external debt: - End-December 2008: US$ 5,610 million - End-December 2004: US$ 9,248 million - Creditor shares at end-December 2008: - Multilateral creditors: 8.3 percent of total debt - Bilateral and commercial creditors: 91.7 percent of total debt - Largest creditors (percent of total outstanding debt): - IDA: 5.3 percent - France: 28.1 percent - Brazil: 6.9 percent - Spain: 7.8 percent - London Club creditors: 8.1 percent NPV of public and publicly guaranteed external debt at end-December 2008 (after full delivery of HIPC assistance committed at decision point): - Total NPV: US$ 3.5 billion - Equivalent ratios: - 63 percent of fiscal revenue (excluding grants) - 48.6 percent of three-year average of exports - Creditor breakdown (end-2008 NPV terms): - Multilateral creditors: US$ 253 million - Paris Club creditors: US$ 1,890 million - Other bilateral creditors: US$ 343 million - Commercial creditors: US$ 993 million ### Topping-up assessment - Staffs view: Congo does not meet the requirements for topping-up assistance under the Initiative. - Rationale: - Topping-up could be provided only if debt ratios have deteriorated relative to the decision point projections. - Congo’s NPV of debt-to-revenue ratio after HIPC and additional bilateral relief is far below the HIPC threshold of 250 percent. - This ratio was estimated at about 38 percent in 2008. ### Drivers of NPV of debt-to-revenue ratio change (end-2008) - NPV of debt-to-revenue ratio as projected at the Decision Point: 122.9 - NPV of debt-to-revenue ratio (actual): 63.0 - Unanticipated change in the ratio: -59.9 (100.0 percent of the total increase measure in Text Table 4) - Breakdown of contributors (percentage points and percent of total increase): - 1. Due to changes in the parameters: 0.5 (Percent of Total Increase -0.9) - Of which: due to changes in the discount rates: -0.1 (0.2) - Of which: due to changes in the exchange rates: 0.7 ( -1.1) - 2. Due to unanticipated new borrowing: 1.4 (2.4) - Of which: due to higher than expected disbursements: 0.1 (0.1) - Of which: due to lower concessionality of the loans: 1.4 (2.3) - 3. Due to unanticipated changes in revenue: -151.3 (252.6) - 4. Due to changes in HIPC relief and other factors: 89.4 (149.3) - NPV of debt-to-revenue ratio (actual) reiterated: 63.0 - Bilateral debt relief beyond HIPC: -24.6 - NPV of debt-to-revenue ratio after full delivery of HIPC assistance and bilateral debt relief beyond HIPC (actual): 38.4 - Note: The decline in the NPV of debt-to-revenue ratio was driven in large part by a significant increase in oil revenue. ### Revenue, oil, and causes of ratio decline - Total revenue in 2008: US$ 5,523 million - Projected total revenue at decision point for 2008: US$ 1,586 million - Increase in oil revenue reflected three main factors: - i) relatively high world oil prices; - ii) higher than projected production; - iii) an increase in the government's share of oil output (which rises as oil prices increase, as stipulated in its production sharing contracts with private operators). - The decline in the ratio of the NPV of debt-to-revenue more than offset the increase caused by delay in interim assistance delivery. - The Fund-supported program went off-track in the latter half of 2006; in response, the Paris Club stopped its interim assistance for almost two years until a new three-year PRGF arrangement was approved in December 2008. Only after this date did the Paris Club reach understandings on further debt rescheduling. ### MDRI — contingent on completion point approval - MDRI debt relief (net of HIPC assistance) implications: - Additional cancellation of principal payments owed to participating creditors: US$ 177.7 million in nominal terms. - Savings in total debt service through 2043: US$ 201.3 million. AfDF under MDRI - AfDF additional debt relief: US$ 9.1 million (reduction in debt stock). - Equivalent reduction in debt service: about US$ 9.7 million between 2010 and 2039. IDA under MDRI - IDA additional MDRI debt relief: reduction in principal payments of US$ 161.2 million by irrevocably canceling payment obligations for credits disbursed before end-2003 and still outstanding on January 1, 2010. - MDRI debt relief from IDA implies average debt service savings (net of HIPC assistance) of US$ 5.4 million per year through 2043, equivalent to US$ 184.0 million in total debt service. IMF under MDRI - IMF MDRI debt relief amount: SDR 4.8 million (equivalent to about US$ 7.4 million) covering the full stock of debt owed to the IMF at end-2004 that is still outstanding at the completion after full delivery of HIPC debt relief. ### Debt sustainability outlook and baseline macroeconomic assumptions (2009–29) - Long-term growth assumptions broadly similar to decision point, but near- and medium-term growth assumed somewhat weaker due to global financial crisis. - Fiscal revenue expected to rise to over 100 percent of non-oil GDP, significantly higher than projections at decision point. - External borrowing assumed minimal given Congo’s increased oil wealth. Text Table 5 — selected baseline macroeconomic assumptions (annual percentage change unless otherwise indicated; in percent of non-oil GDP unless otherwise indicated) - National income and prices (real GDP growth): - 2009–13: 6.1 - 2014–18: 3.0 - 2019–23: 4.7 - 2024–29: 4.9 - Oil (real growth): - 2009–13: 7.1 - 2014–18: -9.7 - 2019–23: -9.5 - 2024–29: -9.5 - Non-oil (real growth): - 2009–13: 5.9 - 2014–18: 6.9 - 2019–23: 6.5 - 2024–29: 5.7 - Consumer prices (end-of-period): - 2009–13: 3.0 - 2014–18: 3.0 - 2019–23: 3.0 - 2024–29: 3.0 - Exports of goods and services: - 2009–13: 6.8 - 2014–18: -6.1 - 2019–23: -3.8 - 2024–29: -0.8 - Current account balance (in percent of GDP): - 2009–13: 0.6 - 2014–18: 0.7 - 2019–23: -9.3 - 2024–29: -15.7 - Central government (in percent of non-oil GDP unless otherwise indicated): - Total revenue and grants: - 2009–13: 130.1 - 2014–18: 97.7 - 2019–23: 60.6 - 2024–29: 45.4 - Total expenditure: - 2009–13: 63.1 - 2014–18: 45.9 - 2019–23: 36.2 - 2024–29: 31.5 - Non-oil primary basic balance: - 2009–13: -30.4 - 2014–18: -18.2 - 2019–23: -10.6 - 2024–29: -5.3 - Overall balance: - 2009–13: 67.0 - 2014–18: 51.8 - 2019–23: 24.4 - 2024–29: 13.9 - National income (nominal GDP): - Nominal GDP (in CFAF billion): - 2009–13: 5.7 - 2014–18: 6.3 - 2019–23: 7.4 - 2024–29: 10.2 - Oil (nominal GDP share): - 2009–13: 3.6 - 2014–18: 2.9 - 2019–23: 1.8 - 2024–29: 1.1 - Non-oil (nominal GDP share): - 2009–13: 2.1 - 2014–18: 3.4 - 2019–23: 5.5 - 2024–29: 9.1 - Nominal GDP (in US$ billion): - 2009–13: 12.1 - 2014–18: 13.2 - 2019–23: 15.5 - 2024–29: 21.3 Box 2 — baseline macroeconomic assumptions (highlights) - Real GDP growth: Average annual overall real GDP growth for 2009–29 is projected at 4.7 percent. - For 2009–29: economic growth expected to be led by the non-oil sector; average real oil growth projected around -5.5 percent; real non-oil growth expected to reach 6.2 percent. - World oil price and production: Oil production expected to peak in 2011 at 137 million barrels per year and gradually decline to 24 million barrels per year in 2029. - Inflation: projected to decline to 3.2 percent by end of 2009 and hold at 3 percent thereafter. - Current account balance: expected to turn to a surplus of 1.8 percent of GDP in 2010, rise to around 5 percent for 2011-2016, swing into deficit in 2017, and reach over 15 percent of GDP deficit by 2029, financed by FDI and oil revenue savings deposited in the oil stabilization account at the BEAC. - FDI in the non-oil sector: projected to grow by around 10 percent annually; share of non-oil sector in FDI projected to increase to over 80 percent in 2029 from about 10 percent in 2009. - Government balance: non-oil primary basic balance expected to reach sustainable level of 4–6 percent of non-oil GDP by 2026; overall fiscal balance projected to continue to record a surplus but decline to about 10 percent of non-oil GDP in 2029 from 70-90 percent in 2010–2012. - External assistance: grants assumed to remain at around 1 percent of GDP annually through 2029. New loans expected from AFD, BADEA, IDA, and China; from 2019 limited amounts of non-concessional loans from the IBRD. - Domestic borrowing: no new domestic borrowing assumed for entire projection period; domestic arrears assumed fully repaid by 2014. *Source: IMF staff report excerpts contained in the supplied content.* ### 86. After reaching the decision point in March 2006, the authorities negotiated debt ### _cr1077 - 86. After reaching the decision point in March 2006, the authorities negotiated debt ### Debt relief agreements and outcomes - Paris Club creditors provided flow relief on the basis of Cologne terms. - A commercial debt restructuring agreement with the London Club was finalized in November 2007. - Several non-Paris Club creditors and commercial creditors settled their claims with Congo with HIPC comparable terms in the interim period. - The Congolese eliminated a large portion of their commercial debt under litigation at the end of 2008, which corresponds to about 5 percent of total debt outstanding in the 2004 NPV terms. - Full delivery of HIPC and MDRI debt relief at the completion point would significantly reduce Congo’s external public debt. ### Debt stock and service projections (post-HIPC/MDRI) - NPV of debt-to-revenue ratio (including new borrowing) estimated to fall from 250 percent at end-2004 to 66 percent in 2010. - Staff projections indicate the ratio would remain well below the HIPC threshold of 250 percent over the entire projection period, reaching about 15 percent by 2029. - External debt service as a ratio of revenue after full delivery of HIPC debt relief: - Estimated at 5 percent in 2010. - Expected to remain below 10 percent over the projection period and to decline gradually in the long term. - In end-December 2008 NPV terms, the stock of debt would decline to US$ 3.7 billion at end-2010. - Nominal debt service relief over the projected period would amount to US$ 4.6 billion, of which US$ 201 million would be related to the MDRI. - Revisions to end-2004 debt data resulted in a downward adjustment in the amount of HIPC debt relief: - Common reduction factor declined from 32.4 percent to 31.1 percent. - Amount of HIPC debt relief required to reduce the NPV of debt-to-revenue ratio to 250 percent lowered from US$ 1,679 million (estimated at the decision point) to US$ 1,575 million. - Financing assurances received regarding participation in the enhanced HIPC Initiative from creditors representing more than 80 percent of the NPV of debt at end-2004, after traditional debt relief mechanisms have been applied. - Full delivery of HIPC debt relief, and additional bilateral assistance beyond HIPC and MDRI: - In end-2008 NPV terms, the stock of debt would decline to US$ 2,014 million at the completion point. ### Sensitivity analysis — scenarios and impacts Two alternative scenarios were simulated to assess vulnerability of Congo’s external debt burden indicators after assuming full delivery of enhanced HIPC assistance, additional bilateral assistance, and MDRI relief. - Alternative Scenario 1: Lower oil price - Assumes Congolese oil price is lower than the baseline by 25 percent. - Consequences: lower fiscal revenue, lower exports (in value terms), need to reduce public investment to achieve long-term sustainability (which could weaken non-oil growth). - Impact on debt indicator: The ratio of the NPV of external debt-to-revenue rises; over the period 2009–29 the ratio is on average higher by about 8 percentage points per year relative to the baseline scenario. - Alternative Scenario 2: Lower non-oil economic growth - Assumes non-oil economic growth is lower than the baseline by 2 percentage points. - Causes could include adverse external environment, slow implementation of structural reforms, and erosion in the business environment. - Consequences: adverse impact on non-oil fiscal revenues and non-oil exports; government would need to reduce expenditures, including public investment, potentially further weakening non-oil growth. - Impact on debt indicator: The NPV of external debt-to-revenue over the period 2009–29 is higher by about 1.5 percentage points per year relative to the baseline scenario. - Under both scenarios, the NPV of debt-to-revenue ratio remains below the 250-percent threshold over the simulation period. ### Vulnerability, policy implications, and recommended actions - The sensitivity analysis indicates that Congo is moderately vulnerable to shocks after the substantial debt relief expected at the completion point. - Although debt indicators deteriorate under alternative scenarios compared to the baseline, they stay below the HIPC threshold of 250 percent of fiscal revenue for the entire projected period. - The debt relief expected at the completion point would strengthen the resilience of the country’s debt indicators to shocks. - Policy recommendations emphasized: - Continue to strengthen debt management. - Maintain a conservative borrowing policy. - Maintain fiscal discipline and increase non-oil revenue. - Implement structural reform in key areas to help safeguard long-term debt sustainability. ### Conclusion and staff recommendation - Staffs of IDA and IMF consider that Congo has met the requirements established in March 2006 for reaching the completion point under the enhanced HIPC initiative. - Congo has satisfactorily implemented the conditions specified for reaching the completion point, introduced required measures under the eight triggers, and implemented reforms in public investment management, procurement, governance and oil sector management. - Staffs recommend that the Executive Directors determine that Congo has reached the completion point under the enhanced HIPC Initiative. ### Issues for discussion proposed for Executive Directors - Completion point: Do Directors agree that Congo has reached the completion point under the enhanced HIPC Initiative, considering the emphasis in the decision point document on the need to establish a track record of sustained performance? - Data Revision: Do Directors agree with staffs’ recommendation that the revenue data and the updated stock of debt in end-2004 NPV terms warrant a revision in the proposed amount of HIPC assistance? - Creditor Participation: Do Directors agree that Congo’s creditors have given sufficient assurances to irrevocably commit HIPC Initiative assistance to the Congo? - HIPC assistance from the IMF: Do IMF Directors agree with the downward revision in IMF HIPC assistance from SDR 5.637 million to SDR 5.395 million? - MDRI/HIPC debt relief: Do IMF Directors agree that Congo qualifies for debt relief from the IMF equal to about SDR 10.9 million, of which an estimated SDR ...? *Source: _cr1077 - 86.* ### 4.8 million would be financed from the MDRI-II Trust, and the rest from Congo’s ### _cr1077 - 4.8 million would be financed from the MDRI-II Trust, and the rest from Congo’s ### Composition of external debt (end-December 2004 and end-December 2008) - End December-2004 composition (in percent): - Paris Club: 54 - Commercial: 37 - Non Paris Club bilateral: 3 - African Development Bank: 2 - IDA: 3 - Other multilaterals: 1 - IMF: 0 - End December-2008 composition (in percent): - Paris Club: 60 - Commercial: 22 - Non Paris Club bilateral: 10 - IDA: 5 - IMF: 1 - African Development Bank: 1 - Other multilaterals: 1 ### Stock and NPV summary at end-December 2004 (Table 1 highlights) - Nominal total: 9,248.3 (US$ million) - Multilateral: 524 (US$ million) — 6 percent of total - African Development Bank: 138 (US$ million) — 1 percent of total - IDA: 270 (US$ million) — 3 percent of total - IMF: 29 (US$ million) — 0 percent of total - Official bilateral and commercial: 8,725 (US$ million) — 94 percent of total - Paris Club: 5,048 (US$ million) — 55 percent of total - Commercial: 3,388 (US$ million) — 37 percent of total - London Club (of commercial): 2,177 (US$ million) — 24 percent of total (revised to indicate participating creditors in 2007 London Club agreement) ### NPV and debt-relief arithmetic at end-2004 (Table 2 highlights) - Revised NPV of debt at end-2004: 5,071 (US$ million) - Central government revenues at end-2004: 1,399 (US$ million) - Revised NPV of debt-to-revenue ratio (percent): 363 - Assistance (decision point document) total: 1,679 (US$ million) with Reduction Factor 32.45 (Percent) - Assistance (revised) total: 1,575 (US$ million) with Reduction Factor 31.05 (Percent) ### External debt indicators and projections (2009–28) — thematic description - Figures present projected Net Present Value of External Debt-to-Revenue and Debt Service-to-Revenue indicators for medium- and long-term public sector debt for 2009–28 under multiple debt-relief scenarios: - After traditional debt relief mechanism - After enhanced HIPC assistance - After additional bilateral assistance beyond HIPC assistance - After MDRI and bilateral relief beyond HIPC assistance - No single numeric series is provided in the figure text extract; figure captions emphasize the comparative paths of the indicators under the scenarios listed above. ### Sensitivity analysis (2009–28) — scenarios and definitions (Figure 3) - Scenarios analyzed: - Baseline scenario - Lower oil price scenario: "25 percent lower than baseline scenario." - Non-oil GDP shock scenario: "2 percentage points lower than baseline scenario." - Indicators shown under scenarios: - Net Present Value of External Debt-to-Revenue (in percent) relative to the HIPC threshold - Debt Service-to-Revenue (in percent) - The sensitivity analysis maps how the NPV-to-revenue and debt-service-to-revenue indicators evolve under the baseline and shocks, relative to the HIPC threshold. ### Creditor participation and debt-relief shares (Table 4 / participation status) - Debt relief in NPV terms by creditor group (US$ million and percent of total assistance): - Total multilateral: 112.9 (7.2 percent of total assistance) - African Development Bank: 37.6 (2.4 percent) - IDA: 47.0 (3.0 percent) - IMF: 7.7 (0.5 percent) - OFID: 3.9 (0.2 percent) - Paris Club creditors: 837.0 (53.2 percent) - Non-Paris Club creditors: 55.8 (3.5 percent) - Total bilateral: 892.8 (56.7 percent) - Total commercial: 568.9 (36.1 percent) - London Club (of commercial): 223.8 (14.2 percent) - Total debt relief (aggregate): 1,574.6 (100.0) - Participating the initiative: 80.6 (percent — as reported in table) - Participation status and modalities: - Paris Club creditors will provide relief based on Cologne terms; the UK, Brazil and Russia were noted as yet to sign bilateral agreements (as of the table). - Some non-Paris Club creditors had signed agreements cancelling substantial shares of claims (examples in table: Bulgaria, Libya, Romania). - Commercial creditors: a London Club agreement in November 2007 led to issuance of Euro bonds worth $477 million to be paid over 22 years; creditors holding 92 percent of eligible debt participated. ### Nominal and NPV outstanding at end-December 2008 (Table 5 highlights) - Total nominal debt: 5,610.3 (US$ million) — 100.0 percent - NPV of debt (end-December 2008): 5,051.3 (US$ million) — 100.0 percent - NPV after enhanced HIPC relief: 3,479.0 (US$ million) - NPV after additional bilateral relief: 2,118.5 (US$ million) - Multilateral institutions nominal: 465.3 (US$ million) — 8.3 percent of total nominal - IDA (nominal): 296.4 (US$ million) — 5.3 percent of total nominal - IMF (nominal): 38.2 (US$ million) — 0.7 percent of total nominal - Paris Club (nominal): 3,395.4 (US$ million) — 60.5 percent of total nominal - Commercial (nominal): 1,207.2 (US$ million) — 21.5 percent of total nominal - London Club (of commercial nominal): 453.9 (US$ million) — 8.1 percent of total nominal ### Discount rates, exchange rates and parameters used - Discount rates used: average commercial interest reference rates (CIRRs) for respective currencies over the six-month period ending in December 2008 (completion point) and December 2004 (decision point); where CIRRs unavailable, the SDR discount rate used as proxy. - Sample discount rates (in percent per annum) and U.S. dollar per currency (end-of-period exchange rates) at decision point and completion point (selected): - United Arab Emirates Dirham: 4.64 (decision point) — 4.65 (completion point); exchange rate 0.27 (decision point) — 0.27 (completion point) - Euro: 4.82 — 5.27; exchange rate 1.36 — 1.39 - United States Dollar: 5.03 — 4.45; exchange rate 1.00 — 1.00 - Special Drawing Rights: 4.64 — 4.65; exchange rate 1.55 — 1.54 - Paris Club cutoff date: January 1, 1986 - Decision point: March 9, 2006 ### Operational notes, modalities and observations reported in tables - The AfDB Group's total debt relief under the HIPC Initiative was estimated at $41.9 million in end-2004 NPV terms at the decision point; this was more than covered by the 2004–05 arrears clearance agreement. - BADEA provided HIPC relief via concessional arrears restructuring in 2001, revised in 2003, leaving about $2.4 million in end-2004 NPV terms to be delivered at the completion point. - IDA's remaining share of HIPC relief amounts to $33.9 million in end-2004 NPV terms to be delivered at the completion point. - The IMF's remaining share of HIPC relief amounts to US$9.6 million to be delivered at the completion point. - Some non-Paris Club creditors and some commercial creditors provided partial cancellations or reschedulings in the interim period; several bilateral agreements were noted as not yet signed and negotiations ongoing for specific creditors. _Italic: Sources: Congolese authorities; World Bank and Fund staff estimates and projections (extracted from the provided IMF chapter/section)._ ### 1. NPV of total debt (2+4)4,7774,9484,5914,2633,9443,6803,6222,9621,8291,5304,0922,678 ### _cr1077 - 1. NPV of total debt (2+4)4,7774,9484,5914,2633,9443,6803,6222,9621,8291,5304,0922,678 ### I. Pre-relief (NPV of total and outstanding debt) - NPV of total debt (2+4): 4,777 4,948 4,591 4,263 3,944 3,680 3,622 2,962 1,829 1,530 4,092 2,678 - NPV of outstanding debt: 4,777 4,646 4,142 3,648 3,165 2,732 2,374 1,902 1,044 797 3,250 1,680 - Official bilateral and commercial: 4,463 4,344 3,855 3,378 2,916 2,503 2,199 1,769 963 726 3,013 1,558 - Paris Club: 2,410 2,381 2,140 1,903 1,671 1,437 1,290 1,026 582 450 1,704 912 - Other official bilateral: 401 382 361 339 316 293 177 158 133 127 290 152 - Commercial: 1,652 1,581 1,354 1,136 929 773 733 585 249 149 1,018 494 - Multilateral: 314 302 287 270 249 229 175 134 80 71 23 7122 (as listed) - African Development Bank: 53 44 35 26 17 8 0 0 0 0 170 - African Development Fund: 11 11 11 11 11 11 10 10 9 7 6108 (as listed) - BADEA: 11 97520000030 (as listed) - European Union: 22 21 20 19 18 16 10 4 10 1 64 (as listed) - IFAD: 4 44455443344 (as listed) - IDA: 175 175 176 176 175 174 150 118 70 62 169106 (as listed) - IMF: 31 3231282215 0 0 0 0160 (as listed) - OFID: 7 64200000020 (as listed) ### II. After enhanced HIPC assistance - NPV of total debt (2+4): 4,758 4,683 3,759 3,811 3,657 3,509 2,830 2,374 1,620 1,441 3,585 2,192 - NPV of outstanding debt: 4,758 4,381 3,310 3,196 2,877 2,562 1,582 1,315 835 708 2,742 1,193 - Official bilateral and commercial: 4,450 4,137 3,074 2,970 2,665 2,366 1,418 1,181 755 637 2,535 1,072 - Paris Club: 3,114 2,861 1,906 1,900 1,685 1,471 1,018 899 615 529 1,666 821 - Other official bilateral: 343 326 308 289 269 248 132 114 95 91 124 2110 (as listed) - Commercial: 993 949 860 780 710 647 268 168 451 662 7140 (as listed) - Multilateral: 3 309 244 236 226 212 196 164 134 80 7120 7121 (as listed) - African Development Bank: 53 44 35 26 17 8 0 0 0 170 - African Development Fund: 11 11 11 11 11 11 10 10 9 7 6108 (as listed) - BADEA: 11 66520000030 (as listed) - European Union: 20 21 20 19 18 16 10 4 10 1 64 (as listed) - IFAD: 4 44455443344 (as listed) - IDA: 171 134 137 139 140 142 140 118 70 62 143106 (as listed) - IMF: 31 2423232014 0 0 0 0130 (as listed) - OFID: 7 00000000010 (as listed) ### III. NPV after full delivery (as assumed at decision point) - NPV of total debt after full delivery: 4 3,479 3,732 3,759 3,811 3,657 3,509 2,830 2,374 1,620 1,441 3,382 2,192 - Multilateral (end-Dec 2008): 253 244 236 226 212 196 164 134 80 72 120 2121 (as listed) - Bilateral: 2,233 2,236 2,214 2,190 1,955 1,719 1,149 1,013 710 620 1,710 931 - Commercial: 993 949 860 780 710 647 268 168 451 662 7140 (as listed) - As assumed in the decision point: 1,950 1,749 1,750 1,767 1,796 1,828 1,994 2,065 ......1,862 2,050 (as listed) ### IV. After bilateral debt relief beyond HIPC assistance - NPV of total debt (2+4): 4,496 4,476 2,326 2,370 2,255 2,147 1,790 1,458 996 904 2,517 1,355 - NPV of outstanding debt: 4,496 4,174 1,877 1,755 1,476 1,200 542 398 210 171 1,674 356 - Official bilateral and commercial: 4,242 3,930 1,641 1,529 1,264 1,004 378 265 130 100 1,472 235 - Paris Club: 3,114 2,861 686 678 508 339 0 0 0 0 7600 (as listed) - Other official bilateral: 333 316 298 279 259 238 121 104 87 83 2323 2100 (as listed) - Commercial: 795 752 657 572 496 427 257 161 431 648 1135 (as listed) - Multilateral: 253 244 236 226 212 196 164 134 80 72 120 2121 (as listed) - African Development Bank: 53 44 35 26 17 8 0 0 0 0 170 - African Development Fund: 11 11 11 11 11 11 10 10 9 7 6108 (as listed) - BADEA: 8 66520000020 (as listed) - European Union: 20 21 20 19 18 16 10 4 10 1 64 (as listed) - IFAD: 4 44455443344 (as listed) - IDA: 132 134 137 139 140 142 140 118 70 62 139106 (as listed) - IMF: 23 2423232014 0 0 0 0130 (as listed) - OFID: 2 00000000000 (as listed) - NPV of total debt after full delivery: 4 2,119 2,011 1,877 1,755 1,476 1,200 542 398 210 171 1,262 356 - Multilateral: 253 244 236 226 212 196 164 134 80 72 120 2121 (as listed) - Bilateral: 1,070 1,015 984 957 767 577 121 104 87 83 579100 (as listed) - Commercial: 795 752 657 572 496 427 257 161 431 648 1135 (as listed) ### V. After MDRI assistance and bilateral debt relief beyond HIPC assistance - NPV of total debt (2+4): 4,391 4,368 2,216 2,260 2,147 2,039 1,689 1,379 958 873 2,411 1,285 - NPV of outstanding debt: 4,391 4,065 1,767 1,646 1,367 1,092 440 319 173 140 1,568 287 - Official bilateral and commercial: 4,242 3,930 1,641 1,529 1,264 1,004 378 265 130 100 1,472 235 (as listed) - Multilateral: 149 135 126 117 104 88 62 55 43 40 96 52 (as listed) - African Development Bank: 53 44 35 26 17 8 0 0 0 0 170 - African Development Fund: 55 45 55 66 55 6 (as listed) - BADEA: 8 66520000020 (as listed) - European Union: 20 21 20 19 18 16 10 4 10 1 64 (as listed) - IFAD: 4 44455443344 (as listed) - IDA: 40 3838394041434133324139 (as listed) - IMF: 17 1718191713 0 0 0 0100 (as listed) - OFID: 2 00000000000 (as listed) - NPV of total debt after full delivery: 4 2,014 2,205 2,216 2,260 2,147 2,039 1,689 1,379 958 873 1,998 1,285 ### VI. Debt service and sectoral composition (annual and averages) - Total debt service including new borrowing (After traditional debt-relief mechanisms): 374.37 740.87 706.46 76.26 06.12 89.93 49.94 21.04 33.24 33.24 39.33 68.2 (as listed) - Total debt service on outstanding debt (After traditional): 371.37 37.27 02.06 66.05 91.02 02.62 10.72 82.42 98.74 07.62 34.5 (as listed) - Multilateral debt service (After traditional): 26.8 28.5 30.8 33.6 31.8 15.6 16.6 15.6 12.8 25.3 15.5 (as listed) - Official bilateral (After traditional): 189.24 01.63 85.43 67.53 56.61 34.31 21.01 62.31 73.32 37.31 38.2 (as listed) - Paris Club (After traditional): 152.9 36.3 1346.9 329.7 319.3 110.0 109.9 150.7 161.2 201.2 126.6 (as listed) - After enhanced HIPC assistance: Total debt service including new borrowing: 228.5 296.8 286.4 491.4 476.7 218.8 278.1 302.6 303.3 354.8 277.1 (as listed) - After bilateral debt relief beyond HIPC: Total debt service including new borrowing: 217.2 238.6 221.2 378.0 365.4 153.4 193.9 190.5 183.9 256.2 186.6 (as listed) - After MDRI assistance and bilateral debt relief beyond HIPC assistance: Total debt service including new borrowing: 217.2 234.8 215.6 372.1 359.5 147.6 182.5 179.5 175.7 251.1 176.5 (as listed) - Memorandum item — Debt service of new borrowing: 3.0 3.6 4.4 10.2 15.1 87.3 139.1 138.6 134.5 31.8 133.7 (as listed) ### VII. Key external debt indicators (selected ratios) - After traditional debt relief: - NPV of debt-to-GDP ratio: 4458 3832 2928 2717 8617863316 (as listed) - NPV of debt-to-exports ratio: 677056483835474832274645 (as listed) - NPV of debt-to-revenues ratio: 8616181665854564120167038 (as listed) - After enhanced HIPC assistance: - NPV of debt-to-GDP ratio: 4454 3129 2727 2114 762813 (as listed) - NPV of debt-to-exports ratio: 676646433534373929264036 (as listed) - NPV of debt-to-revenues ratio: 8615267595352443318156131 (as listed) - After additional beyond HIPC bilateral assistance: - NPV of debt-to-GDP ratio: 42521918171613944208 (as listed) - NPV of debt-to-exports ratio: 636328272221232418162722 (as listed) - NPV of debt-to-revenues ratio: 8114641373332282011104319 (as listed) - After MDRI: - NPV of debt-to-GDP ratio: 41511817161512843198 (as listed) - NPV of debt-to-exports ratio: 616227252120222317162621 (as listed) - NPV of debt-to-revenues ratio: 801423935313026191194118 (as listed) ### VIII. Memorandum items (selected, in millions of U.S. dollars) - NPV of debt after traditional debt relief: 4,777 4,948 4,591 4,263 3,944 3,680 3,622 2,962 1,829 1,530 4,024 2,793 - Debt service after traditional debt relief: ...374741706676606290350421433439362 (as listed) - NPV of debt after HIPC assistance: 4,758 4,683 3,759 3,811 3,657 3,509 2,830 2,374 1,620 1,441 3,467 2,267 - Debt service after HIPC assistance: ...228297286491477219278303303355274 (as listed) - NPV of debt after additional bilateral relief: 4,496 4,476 2,326 2,370 2,255 2,147 1,790 1,458 996 904 2,319 1,400 - Debt service after additional bilateral relief: ...217239221378365153194191184256187 (as listed) - NPV of debt after MDRI and additional bilateral relief: 4,391 4,368 2,216 2,260 2,147 2,039 1,689 1,379 958 873 2,213 1,326 - Debt service after MDRI and additional bilateral relief: ...217235216372359148183180176251177 (as listed) - GDP: 10,774 8,596 12,062 13,305 13,470 13,166 13,610 17,064 23,367 25,029 12,648 18,035 - Exports of goods and services: 8,470 6,391 9,676 10,753 10,646 9,924 7,218 5,945 5,620 5,652 8,827 6,025 - Government revenue: 5,523 3,076 5,646 6,433 6,837 6,804 6,490 7,185 8,939 9,432 6,244 7,482 ### IX. Baseline and Sensitivity Scenarios (2009–28, selected indicators) - Baseline scenario (A. Baseline): - NPV of debt-to-revenue ratio: 723935313026191193418 (as listed) - Debt service-to-export ratio: 322342333 33 (as listed) - Debt service-to-revenue ratio: 743552322 42 (as listed) - Memorandum — NPV of debt: 2,205 2,216 2,260 2,147 2,039 1,689 1,379 958 873 1,997 1,326 - New debt: 3034496147799471,2481,0607867339271,025 (as listed) - Debt service: 217235216372359148183180176251177 (as listed) - B-1. Lower oil price scenario (25% lower): - NPV of debt-to-revenue ratio: 7254504442352513114524 (as listed) - Debt service-to-export ratio: 333553443 43 (as listed) - Debt service-to-revenue ratio: 765873322 63 (as listed) - Memorandum items mirror baseline NPV and debt service figures (as listed) - B-2. Non oil GDP shock (2 percentage points lower): - NPV of debt-to-revenue ratio: 7239353230272213123521 (as listed) - Debt service-to-export ratio: 322442344 33 (as listed) - Debt service-to-revenue ratio: 743552322 43 (as listed) - Memorandum items mirror baseline NPV and debt service figures (as listed) ### X. Delivery of IMF Assistance under Enhanced HIPC Initiative and MDRI (2006–15, selected) - Projected pre MDRI cutoff date debt at completion point: 7.9 (as listed) - Delivery of debt relief (on stock basis): - from the MDRI-II Trust: 4.8 - from the HIPC Umbrella Account: 3.1 - Delivery of remaining HIPC assistance for post MDRI cutoff date debt (on stock basis): 3.1 - Debt service due to the IMF after HIPC and MDRI relief (selected): 1.5 0.1 0.1 0.05 - 0.1 0.1 1.7 3.2 3.5 3.7 (as listed) - Total IMF assistance under the enhanced HIPC Initiative is SDR 5.395 million in NPV terms (as listed) *Sources: Congolese authorities; and World Bank and Fund staff estimates and projections.* ### 1. Relief under the Enhanced HIPC Initiative ### 1. Relief under the Enhanced HIPC Initiative ### World Bank HIPC and MDRI delivery (selected figures) - World Bank debt service before HIPC relief (selected annual values, in millions of U.S. dollars unless otherwise indicated): 7.3, 7.3, 7.3, 7.2, 7.4, 7.9, 8.8, 9.6, 11.1, 12.8, 12.7, 12.6, 12.6, 12.5, 12.4, 14.3, 7.9, 6.5, 6.2, 0.7, 10.9, 7.2 - Principal component of World Bank debt service (selected values): 5.3, 5.3, 5.3, 5.3, 5.2, 5.7, 6.7, 7.5, 9.1, 10.9, 10.9, 10.9, 10.9, 10.9, 10.9, 13.3, 7.3, 6.1, 6.1, 0.7, 9.2, 6.8 - Interest component of World Bank debt service (selected values): 2.0 2.0 2.0 1.9 2.2 2.1 2.1 2.0 2.0 1.9 1.8 1.7 1.7 1.6 1.5 1.0 0.6 0.3 0.1 0.0 1.7 0.4 - World Bank debt service after HIPC relief (selected values): 4.7, 3.7, 3.7, 3.6, 3.9, 4.2, 4.8, 5.3, 6.1, 7.1, 7.1, 7.1, 7.0, 7.0, 6.9, 14.3, 7.9, 6.5, 6.2, 0.7, 7.5, 7.2 - World Bank assistance (selected values): 2, 2.7, 3.6, 3.6, 3.6, 3.5, 3.7, 4.0, 4.3, 5.0, 5.7, 5.6, 5.6, 5.6, 5.5, 5.5, 0.0, 0.0, 0.0, 0.0, 3.4, 0.0 ### MDRI / IDA figures and impacts - Projected stock of IDA credits outstanding at implementation date: 291.1 - Debt stock reduction on eligible credits: 207.3 - Due to HIPC relief: 46.2 - Due to MDRI: 161.2 - Remaining IDA credits after MDRI relief: 83.7 - IDA debt service relief under the MDRI (selected values, in millions of SDR): 2.1, 3.6, 3.9, 4.0, 4.7, 5.4, 5.4, 5.4, 5.3, 5.3, 5.2, 10.8, 4.5, 3.2, 3.0, 0.0, 6.5, 4.2 - Debt service due to IDA after HIPC relief and the MDRI (selected values): 1.8, 0.6, 0.8, 1.3, 1.4, 1.7, 1.7, 1.7, 1.7, 1.7, 1.7, 3.5, 3.4, 3.3, 3.2, 0.7, 1.9, 3.0 ### Memorandum and interim items - Debt service to IDA covered by HIPC (in percent) (selected): 0.0, 0.5, 0.5, 0.5, 0.5, 0.5, 0.5, 0.4, 0.5, 0.4, 0.4, 0.4, 0.4, 0.4, 0.4, 0.0, 0.0, 0.0, 0.0, 0.0, 0.3, 0.0 - Debt service to IDA covered by HIPC and MDRI (in percent) (selected): 0.0, 0.5, 0.5, 0.5, 0.8, 0.9, 0.9, 0.9, 0.9, 0.9, 0.9, 0.9, 0.9, 0.9, 0.9, 0.8, 0.6, 0.5, 0.5, 0.0, 0.7, 0.5 - Interim Assistance: 13.1 - Interim relief as percent of total: 0.3 - IDA debt service relief under the MDRI (in millions of SDR) (selected): 2.4, 4.1, 4.4, 4.5, 5.2, 5.9, 5.9, 5.8, 5.8, 5.8, 5.7, 11.4, 4.7, 3.2, 3.0, 0.0, 7.1, 4.3 ### Notes on conversions, coverage, and calculations (as stated) - Total HIPC debt relief amounts to US$47 million in NPV terms, using end-2004 discount and exchange rates. - Stock of debt and debt service denominated in SDRs are converted into U.S. dollar by applying the end-2008 exchange rate. - Stock of debt outstanding as of end-December 2008. - Debt disbursed as of end-December 2003 and still outstanding as of end-December 2008. - HIPC relief is assumed to proportionally reduce repayments of principal and charges on IDA credits disbursed as of end-December 2004 and still outstanding as of end-December 2008. - Using end-2008 exchange rates. - In end-2004 net present value (NPV) terms. - For the 2006-2009 period, debt service and debt relief is estimated on debt outstanding as of end-December 2004, using end-2004 exchange rates. For the projection period beginning in 2010, debt service is equivalent amounts by applying the foreign exchange reference rate of 1.52448 agreed by donors under the latest regular IDA replenishment. - For SDR-denominated IDA credits, debt relief under the MDRI is estimated as 100 percent of SDR-based debt service minus USD-based debt relief under the Enhanced HIPC Initiative. ### Paris Club creditors' delivery of bilateral initiatives (summary of modalities) - Table summarizes creditor-by-creditor provision of relief (selected entries): - Australia: HIPCs 100 100 100 100 - Belgium: HIPCs 100 100 100- 100 flow/Stock - Canada: HIPCs 100 100 100 flow/Stock (notes on moratorium and completion point cancellations) - France: HIPCs 100 100 100-100 flow/Stock (details on commercial claim cancellation at decision point) - Germany: HIPCs 100 100 100 100 100 flow/Stock - Italy: HIPCs 100 100 100 flow/Stock (cancellation of debts incurred before June 20, 1999) - Japan: HIPCs 100 100 100--Stock - Netherlands: HIPCs 100 8/100 100-90-100 flow/Stock (special cases listed) - Norway: HIPCs 9/9/10/10/-- - Russia: HIPCs S- 11/ - 11/ 100100-Stock (no ODA claims noted) - Spain, Sweden, Switzerland, United Kingdom, United States: entries indicating mixes of 100 percent cancellation, flow and/or stock treatment, and case-by-case provisions - Source: Paris Club Secretariat. - Explanatory notes cover specific creditor practices, cutoff dates, treatment of ODA vs non-ODA claims, interim vs completion point treatments, and special country cases. ### HIPC Initiative: Status of country cases (selected aggregated figures) - Completion point reached under enhanced framework (26 countries) — selected country figures (Decision/Completion point, Target, Estimated Total Assistance, NPV of Debt-to-Exports, Debt Reduction in NPV, Relief in Nominal U.S. dollars): - Benin: Jul. 00 / Mar. 03 — (selected numbers in table) - Bolivia: (multiple entries for original and enhanced frameworks) — 1,302 425 876 841 942,060 (as in table) - Burkina Faso: 553 834 695 723 1930 (as in table) - Burundi: Aug. 05 / Jan. 09 — 1,508 331 277 062 842592 1,366 - Cameroon: Oct. 00 / Apr. 06 — 1,501 1,267 879 322 371 76274,917 - Ethiopia: 1,982 637 1,315 608 323,275 (enhanced framework entries also included) - Ghana: Feb. 02 / Jul. 04 — 1,442 502 2,186 1,084 1,102 11278 1563,500 - Mozambique: 2,023 1,270 753 143443 4,300 (original and enhanced framework lines present) - Niger, Rwanda, São Tomé and Príncipe, Senegal, Sierra Leone, Tanzania, Uganda, Zambia: entries listed with their respective numeric values in the table. - Decision point reached under enhanced framework (9 countries) — selected entries: - Afghanistan: Jul. 07 Floating 150 571 436 1350 755 11,272 - Chad: May. 01 Floating 150 170 351 341 868 302 60 - Cote d'Ivoire: Mar. 09 Floating 250 3,005 2,311 694 3840 22 43,129 - Congo, Democratic Rep. of: Jul. 03 Floating 150 6,311 3,837 2,474 472 831 8010,389 - Congo Rep. of: Mar. 06 Floating 250 1,679 1,561 118 849 322 2,881 - Guinea, Guinea-Bissau, Liberia, Togo: entries with their respective numeric values in the table. - Total assistance provided/committed: 42,690 (total), 21,876 (IMF), 20,686 (World Bank), 3,407 (Debt Relief?), 9,729, 71,664 (other totals indicated in table) ### Appendix I — Republic of Congo: Debt management (key findings) - Debt management in Congo has improved since the decision point was reached in 2006, particularly in debt recording and reporting. - Debt management functions are undertaken by the Caisse Congolaise d’Amortissement (CCA), a quasi-independent agency with mandate including: - development of debt management strategies, - participation in negotiation of new loans, - analytical assessment of potential costs and risks of new borrowing. - CCA completed installation of UNCTAD Debt Management and Financial Analysis system (DMFAS); staff received extensive UNCTAD training. - CCA provides the Ministry of Finance with data required to produce and publish quarterly reports regarding external debt stock, arrears, and quarterly flows on the Ministry’s website. - Capacity constraints and procedural deficiencies remain; example: reporting error to the Paris Club at end-2008 where an incorrect discount factor of 79 percent was initially reported and later corrected to 37 percent after reconciliation. - Authorities identified measures to strengthen capacity, including: - procedures for producing annual debt management strategies, - coordination mechanisms between the CCA, Ministry of Finance, and regional monetary authorities, - debt data security and auditing procedures, - analysis of costs and risks of potential new borrowing. - CCA is collaborating with technical assistance providers, notably the World Bank. ### Appendix II — Republic of Congo: Debt Sustainability Analysis using LIC framework (summary) - Risk assessment: - Based on the joint IMF-World Bank LIC DSA, the risk of debt distress for Congo will be moderate, due to presumed debt relief under the enhanced HIPC Initiative. - Only under the most extreme scenario would debt indicators breach relevant thresholds. - Key differences between LIC DSA and HIPC DSA: - LIC DSA discount rate fixed at 4 percent vs HIPC DSA using currency-specific 6-month averages of commercial interest reference rates. - LIC DSA uses WEO exchange rate projections instead of end-2008 actual exchange rates used for HIPC DSA. - Exports for LIC indicators use latest annual projections rather than three-year backward-looking average. - In sensitivity analysis, LIC DSA assumes additional financing needs are filled by new borrowing; HIPC DSA assumes financing from accumulated oil wealth with no new borrowing. - Data basis and recent history: - DSA is based on stock of debt at end-2008. Previous full DSA (Nov. 2008) used end-2007 stock and concluded Congo’s debt distress remained high. - End-2008 totals: total public debt including arrears was US$ 6.6 billion—66 percent of GDP (down from US$ 12 billion in 2004). External debt was US$ 5.6 billion, 57 percent of GDP. - Creditor composition of external debt: Paris Club creditors about 61 percent; non-London Club commercial creditors 13 percent; non-Paris Club bilateral creditors 10 percent. - Domestic debt about 10 percent of GDP, mostly arrears of wages, pensions, and liabilities to public enterprises. - Arrears and relief progress: - External arrears at end-2008: US$ 939 million; domestic arrears: US$ 965 million. - External arrears reduced by 69 percent in 2004–08 due to restructurings and settlements: - Paris Club restructurings in 2004, 2006, and 2008. - London Club relief in 2007. - Settlement with litigating creditors with court-validated claims in 2008. - Debt reduction from various non-Paris Club bilateral and non-London Club commercial creditors on HIPC-comparable terms. - Remaining external arrears composed of non-London Club commercial creditors (suppliers) US$ 694 million (73 percent) and non-Paris Club bilateral creditors US$ 245 million (26 percent). - Government cut domestic arrears in half since 2004. - Underlying DSA assumption revisions incorporated: - Global projections aligned with latest WEO; average oil price in 2009–14 about US$ 78 per barrel (same as previous DSA). - Macroeconomic assumptions revised: average real non-oil sector growth in 2009–14 lowered from 7.3 percent to 6.0 percent; average real oil sector growth raised from 0.4 percent to 4.6 percent due to prospects of new oil production. - Use of latest debt database reconciled for HIPC completion point DSA; debt service projections revised to incorporate full delivery of HIPC/MDRI debt relief expected at completion point. - External borrowing assumptions revised to incorporate newly contracted and prospective loans. *Source: _cr1077 - 1. Relief under the Enhanced HIPC Initiative (PDF).* ### 6. New external borrowing is in line with the PRGF concessionality requirement ### 6. New external borrowing is in line with the PRGF concessionality requirement ### New external borrowing and concessionality - New external borrowing is in line with the PRGF concessionality requirement until 2019 (minimum grant element of at least 50 percent). - Projected creditors and disbursement timing: - French Development Agency (AFD): total loan amounts to €29 million, projected to be disbursed in 2009. - Arab Bank for Economic and Development in Africa (BADEA): total amounts to US$ 10 million, assumed to be disbursed in the period of 2010–13. - China: total lending is equivalent to US$ 1.6 billion, assumed to be disbursed until 2015 in line with the contract signed in 2008. - World Bank (IDA): disbursement expected to start with US$ 9 million in 2010 and US$ 18 million in 2011, and to increase gradually thereafter. IDA financing is on “hardened” terms since Congo passed the IDA-only income threshold in 2007. - Lending terms for both the Chinese and IDA “hardened” loans meet the PRGF concessionality requirement. - Congo is expected to graduate to IBRD status in 2019 and start borrowing from the IBRD thereafter. - The AFD loan is for the Port Authority of Pointe Noire to finance the rehabilitation of the port’s facilities; this loan precludes any loan guarantee from the government of Congo and forms part of a non-concessional external financing package amount to € 67.1 million. Other creditors in that package include the European Investment Bank (EIB) (€29 million) and the Central African States Development Bank (CASDB) (€9.1 million). Since subsequent loans from the EIB and CASDB have not formally contracted, this LIC DSA includes only the loan from the AFD. The Board on the first review under the PRGF provided a waiver for the non-concessionality of the AFD loan. ### Assumptions on arrears and DSA methodology - It is assumed that all external and domestic arrears remaining will be cleared by 2014 through repayment, cancellation and rescheduling. - Roughly a half of external arrears will be cancelled in 2010, and the rest rescheduled for repayment on various terms. - Domestic arrears are projected to be repaid by 2014, incorporated in the government’s budget planning. - DSA presentation: - External DSA is run on a gross basis. - Public DSA is run on a net basis to examine the impact of oil wealth on debt indicators. - Net debt is defined as debt less liquid financial assets. For Congo, liquid financial assets are government deposits at the regional central bank, which mostly consist of oil savings. ### III. EXTERNAL DEBT SUSTAINABILITY ANALYSIS — key findings - Baseline scenario: - In the baseline scenario, all debt indicators remain below the threshold for the entire projection period after the HIPC completion point. - Despite projected declining concessionality of new loans and lower oil revenues, all debt indicators trend downward as the size of new borrowing remains relatively small. - Historical scenario: - The historical scenario appears less favorable than the baseline scenario in the medium term but more favorable in the long term. - In the historical scenario, most debt indicators stay above the baseline scenario until about 2020 because projected oil production, and therefore revenues and exports in the baseline scenario, is much higher than the historical level. - In the long run, the situation reverses, and in the historical scenario most debt indicators stay below the baseline scenario. - Note: The historical scenario shows negative debt ratios over the projection period because oil production under the historical scenario is higher than the baseline after 2020. - Stress tests: - Stress tests indicate Congo is still vulnerable to external shocks. - In the most extreme tests, most debt indicators cross or stay above the threshold. - Given its high dependency on the oil sector, Congo is very sensitive to changes in world commodity prices. - This result is significantly different from that in the HIPC DSA because of different assumptions on new borrowing. ### IV. PUBLIC DEBT SUSTAINABILITY ANALYSIS — key findings - Public DSA on a net basis: - Paints a very different picture from the external DSA on a gross basis owing to Congo’s oil wealth. - Most debt indicators for the public DSA on a net basis turn negative as oil savings accumulate rapidly over time. - Public DSA on a gross basis: - On a gross basis, the picture for public DSA is similar to that for external DSA because domestic debt will shrink to less than 0.3 percent of GDP by 2014, once the government pays back all domestic arrears. - Stress tests for public DSA on a net basis: - Do not suggest any vulnerability. Rapidly growing oil savings will be a strong buffer against shocks. *Source: _cr1077 - 6. New external borrowing is in line with the PRGF concessionality requirement* ### 14. Congo should be considered at moderate risk of debt distress based on the ### _cr1077 - 14. Congo should be considered at moderate risk of debt distress based on the ### Debt distress assessment - "Congo should be considered at moderate risk of debt distress based on the results of the external DSA." - "The external DSA shows that in the baseline scenario debt indicators remain below the policy dependent thresholds, but increase when the country faces shocks." - "It is important that the government continues to strengthen debt management and maintain a conservative borrowing policy." - "The government’s commitment to maintain fiscal discipline and increase non-oil revenue, together with structural reform in key areas, would help to safeguard long-term debt sustainability." ### External DSA: baseline, shock behavior, and interpretation - Baseline dynamics: debt indicators remain below policy dependent thresholds in the baseline scenario (figures and tables 1–4). - Shock behavior: indicators "increase when the country faces shocks"; stress tests identify the "most extreme shock" for each ratio in 2019: - In figure b. it corresponds to a "Combination shock". - In figure c. to an "Exports shock". - In figure d. to a "Combination shock". - In figure e. to an "Exports shock". - In figure f. to a "Combination shock". - The DSA notes that "the main reason for the large residual is the large change in gross foreign assets coming from the accumulation of oil wealth." - Visual indicators referenced across 2009–29 include: - a. Debt Accumulation: "Rate of Debt Accumulation", "Grant-equivalent financing (% of GDP)", "Grant element of new borrowing (% right scale)". - b. PV of debt-to-GDP ratio. - c. PV of debt-to-exports ratio. - d. PV of debt-to-revenue ratio. - e. Debt service-to-exports ratio. - f. Debt service-to-revenue ratio. ### Key statistics from the External Debt Sustainability Framework, Baseline Scenario, 2006–29 (Table 1 highlights) - External debt (nominal) / o/w public and publicly guaranteed (PPG): - 2006: 81.6 - 2007: 90.9 - 2008: 56.6 - 2009: 67.7 - 2010: 20.2 - 2011: 19.2 - 2012: 18.5 - 2013: 18.6 - 2014: 18.7 - 2019: 14.8 - 2029: 3.4 - Change in external debt: - 2006: -26.7 - 2007: 9.3 - 2008: -34.2 - 2009: 11.1 - 2010: -47.5 - 2011: -1.0 - 2012: -0.6 - 2013: 0.1 - 2014: 0.1 - 2019: -1.1 - 2029: -0.8 - Identified net debt-creating flows: - 2006: -48.8 - 2007: -17.9 - 2008: -48.1 - 2009: -13.2 - 2010: -30.2 - 2011: -30.3 - 2012: -31.2 - 2013: -29.3 - 2014: -28.5 - 2019: -17.2 - 2029: -5.8 - Non-interest current account deficit: - 2006: -5.2 - 2007: 7.0 - 2008: -0.1 - 2009: 13.7 - 2010: -2.4 - 2011: -5.3 - 2012: -6.9 - 2013: -5.3 - 2014: -4.3 - 2019: 6.5 - 2029: 17.8 - Exports: - 2006: 85.3 - 2007: 83.4 - 2008: 78.6 - 2009: 74.3 - 2010: 80.2 - 2011: 80.8 - 2012: 79.0 - 2013: 75.4 - 2014: 71.8 - 2019: 48.8 - 2029: 22.6 - Imports: - 2006: 49.4 - 2007: 58.4 - 2008: 51.4 - 2009: 57.0 - 2010: 49.4 - 2011: 47.5 - 2012: 47.6 - 2013: 48.9 - 2014: 49.8 - 2019: 49.7 - 2029: 43.7 - Other selected indicators: - Net FDI (negative = inflow): 2006: -24.5; 2007: -28.0; 2008: -23.2; 2009: -22.7; 2019: -23.2; 2029: -23.5 - Endogenous debt dynamics: - 2006: -19.1 - 2007: 3.1 - 2008: -24.8 - 2009: -4.2 - 2019: -0.5 - 2029: -0.1 - PV of external debt (selected years): - 2011: 27.5 - 2012: 35.4 - 2014: 15.3 - 2019: 12.1 - 2029: 3.4 - PV of PPG external debt in percent of exports (selected years): - 2011: 34.9 - 2012: 47.7 - 2014: 19.4 - 2019: 24.8 - 2029: 15.0 - In percent of government revenues (PV of PPG external debt): - 2011: 53.6 - 2012: 99.0 - 2014: 30.3 - 2019: 26.2 - 2029: 9.0 - Debt service-to-exports ratio (in percent): - 2006: 13.2 - 2007: 10.5 - 2008: 5.4 - 2009: 3.3 - 2010: 2.3 - 2011: 1.9 - 2019: 1.9 - 2029: 3.5 - PPG debt service-to-revenue ratio (in percent): - 2006: 25.3 - 2007: 20.6 - 2008: 8.3 - 2009: 6.8 - 2010: 4.0 - 2011: 3.2 - 2019: 2.0 - 2029: 2.1 - Total gross financing need (Billions of U.S. dollars): - 2006: -1.4 - 2007: -0.9 - 2008: -2.0 - 2009: -0.6 - 2010: -2.8 - 2011: -3.7 - 2019: -2.2 - 2029: -1.2 - Non-interest current account deficit that stabilizes debt ratio: - 2006: 21.5 - 2007: -2.2 - 2008: 34.1 - 2009: 2.6 - 2010: 45.1 - 2011: -4.2 - 2019: 7.6 - 2029: 18.6 ### Public sector debt framework highlights (Table 2) - Public sector debt (percent of GDP): - 2006: 84.3 - 2007: 81.8 - 2008: 43.6 - 2009: 44.7 - 2010: -21.7 - 2011: -47.9 - 2012: -77.4 - 2013: -108.8 - 2014: -139.3 - 2019: -249.9 - 2029: -245.9 - o/w foreign-currency denominated: - Mirrors external debt series: 2006: 81.6; 2007: 90.9; 2008: 56.6; 2009: 67.7; 2019: 14.8; 2029: 3.4 - Change in public sector debt: - 2006: -42.3 - 2007: -2.5 - 2008: -38.2 - 2009: 1.1 - 2010: -66.4 - 2011: -26.2 - 2019: -13.0 - 2029: 6.6 - Identified debt-creating flows: - 2006: -55.2 - 2007: -62.6 - 2008: -51.7 - 2009: -2.0 - 2010: -65.9 - 2011: -26.1 - 2019: -13.0 - 2029: 6.6 - Primary deficit: - 2006: -20.9 - 2007: -13.1 - 2008: -27.6 - 2009: -7.9 - 2010: -25.3 - 2011: -28.8 - 2019: -21.0 - 2029: -10.3 - Revenue and grants: - 2006: 44.4 - 2007: 43.1 - 2008: 51.6 - 2009: 36.3 - 2010: 47.4 - 2011: 49.1 - 2019: 47.2 - 2029: 38.4 - Automatic debt dynamics (contribution from interest rate/growth differential): - 2006: -30.8 - 2007: 2.5 - 2008: -13.0 - 2009: 5.9 - 2010: -11.5 - 2011: 2.7 - 2019: 8.0 - 2029: 16.9 - Other sustainability indicators: - PV of public sector debt (selected years): 2006: 2.7; 2007: -9.1; 2008: 16.7; 2009: 11.5; 2019: -252.6; 2029: -246.0 - Gross financing need 2/: - 2006: -6.5 - 2007: -1.1 - 2008: -20.4 - 2009: -2.1 - 2010: -21.6 - 2011: -25.7 - 2019: -20.1 - 2029: -9.5 - PV of public sector debt-to-revenue and grants ratio (in percent): - 2006: 6.1 - 2007: -21.0 - 2008: 32.3 - 2009: 31.6 - 2019: -534.8 - 2029: -640.5 - Debt service-to-revenue and grants ratio (in percent): - 2006: 32.4 - 2007: 27.7 - 2008: 14.1 - 2009: 16.0 - 2019: 7.8 - 2029: 2.0 ### Sensitivity analysis and stress tests (Tables 3 and 4) - Table 3 (Public and PPG external debt, sensitivity): - Presents alternative scenarios A1, A2 and bound tests B1–B6 across indicators (PV of debt-to-GDP, PV of debt-to-exports, PV of debt-to-revenue, debt service-to-exports, debt service-to-revenue) for 2009–2029. - Notable bound-test outcomes (examples): - B2. Export value growth shock produces very large outcomes in some indicators (e.g., series entries reaching values like 197, 71; 123, 25 in specified cells). - B5. Combination of shocks yields large jumps (e.g., entries like 188, 66; 186, 37 for some indicators). - Memorandum item: "Grant element assumed on residual financing (i.e., financing required above baseline)" shows entries "9 9 9" or "999999 9 9" depending on panel. - Table 4 (Public debt sensitivity): - Alternative scenarios and bound tests produce large swings in PV of Debt-to-GDP Ratio, PV of Debt-to-Revenue Ratio 2/, Debt Service-to-Revenue Ratio 2/ across 2009–2029. - Examples of scenario entries (series formatting preserved from source): - Baseline series: "11-24-51-81-112-143-253-246" and "32-51-103-157-215-269-535-640" and "168686522". - A1, A2, A3 and B1–B5 series provide alternative numeric sequences in same compact format. ### Key macroeconomic and financing assumptions (selected) - Real GDP growth (in percent): - 2006: 6.2 - 2007: -1.6 - 2008: 5.6 - 2009: 7.6 - 2010: 12.1 - 2011: 6.6 - 2019: 4.3 - 2029: 4.8 - GDP deflator in US dollar terms (change in percent): - 2006: 19.5 - 2007: 0.5 - 2008: 33.3 - 2009: -25.8 - 2010: 25.1 - 2011: 3.5 - 2019: -0.9 - 2029: 2.2 - Effective interest rate (percent) 5/: - 2006: 4.5 - 2007: 2.7 - 2008: 2.3 - 2009: 1.6 - 2010: 1.2 - 2011: 2.8 - 2019: 0.9 - 2029: 2.1 - Growth of exports of G&S (US dollar terms, in percent): - 2006: 30.6 - 2007: -3.4 - 2008: 32.7 - 2009: -24.5 - 2010: 51.4 - 2011: 11.1 - 2019: -4.8 - 2029: 0.6 - Government revenues (excluding grants, in percent of GDP): - 2006: 44.3 - 2007: 42.7 - 2008: 51.3 - 2009: 35.8 - 2010: 46.8 - 2011: 48.3 - 2019: 46.3 - 2029: 37.5 - Aid flows (in Billions of US dollars) 7/ and o/w Grants / Concessional loans: - Aid flows: 2006: 0.0; 2007: 0.1; 2008: 0.1; 2009: 0.1; 2010: 0.3; 2011: 0.4; 2019: 0.2; 2029: 0.3 - o/w Grants: 2006: 0.0; 2010: 0.1; 2019: 0.1; 2029: 0.2 - o/w Concessional loans: 2010: 0.2; 2011: 0.3; 2019: 0.0; 2029: 0.0 - Grant-equivalent financing (in percent of GDP) 8/: - 2010: 1.4 - 2011: 1.3 - 2012: 1.4 - 2013: 1.5 - 2014: 1.5 - 2019: 1.0 - 2029: 0.9 ### Policy implications and recommendations (textual) - Continue to strengthen debt management. - Maintain a conservative borrowing policy. - Maintain fiscal discipline and increase non-oil revenue. - Advance structural reform in key areas to "help to safeguard long-term debt sustainability." *Sources: Congolese authorities; and World Bank and Fund staff estimates and projections.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr1077.pdf_