## _cr12243

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### Background and objectives
- Reviews the Republic of Congo’s Poverty Reduction, Growth and Employment Strategy Paper (PRSP-2), completed on January 31, 2012.
- PRSP-2 follows PRSP-1 (covering 2008–11, adopted in April 2008), which was part of the “New Hope” Plan to reconstruct the country after years of conflict.
- PRSP-1 five goals: (i) the amelioration of governance and the consolidation of peace and security; (ii) the promotion of growth and macroeconomic stability; (iii) the improvement of universal access to basic social services; (iv) the improvement of the social environment and the integration of vulnerable groups; and (v) the fight against HIV/AIDS.
- PRSP-2 goal: modernize and industrialize the country; retains PRSP-1 pillars and reinvigorates (i) promotion of diversified, inclusive, employment-creating and value-added growth and (ii) equal distribution of benefits and security of growth geographically. Adds priority of respecting and protecting the environment to slow climate change and reduce harmful extraction of natural resources.
- PRSP-2 preparation: launched March 2011; six thematic groups: (i) governance; (ii) the economy; (iii) infrastructure; (iv) development and social inclusion; (v) education, training, and scientific research; (vi) balanced and sustainable development. Thematic reports adopted July 2011.
- Concern: some participants, including civil society, felt their views were not taken into account.

### Recent developments and fiscal impact
- March 4, 2012 explosions at an ammunition depot caused hundreds of casualties and significant material damage.
- A supplementary budget submitted April 6, 2012 increased expenditures to US$6.5 billion up from US$5.3 billion; the increase financed mostly by domestic resources.
- The impact of these expenditures on the PRSP and its priority action plan to be reported in next year’s progress report.
- Government adopted a Military and Police Forces Programming Law covering 2012-2021.

### Poverty diagnostics and household trends
- 2011 Living Standards Measurement Survey (ECOM 2011) poverty report not yet available; 2010 MDG statistical report’s estimate of a 1.7 percent annual poverty reduction rate cannot be evaluated at this time.
- Survey trend (2005–2011) shows positive signs; larger sample size improves disaggregation.
- Perceived main causes of poverty: unemployment, poor public sector management, lack of household financial resources.
- Urban employment and welfare indicators:
  - Employment rate: 58 percent in 2011 up from 56 percent in 2011 (as presented).
  - Ownership of televisions: 65 percent of households in 2011 up from 34 percent in 2005.
  - Primary school access: five-percentage point rise (no base year percent provided).
- Rural sector indicators:
  - Heads of households increasingly self-employed agricultural workers: 70.5 percent of households (up from 25 percentage points since 2005).
  - Over 10 percent of household heads are unemployed.
  - Ownership of televisions: 8.8 percent of households in 2011 up from 3.3 percent in 2005.
  - Canoes (means of production): 13.5 percent in 2011 up from 8.7 percent in 2005.
  - Internal migrants: 41.6 percent move from rural to urban areas.
- Gender and vulnerability:
  - Gender Inequality Index score: 0.628 for 2011.
  - HIV/AIDS rate: twice as high for women as men (qualitative).
- Staff recommendation: broaden and deepen analysis using ECOM 2011 to produce detailed poverty analysis, national health accounts, benefit-incidence analysis, public expenditure analysis, and poverty maps (using 2011 household survey and 2007 population and housing census). Gender should be both cross-cutting and a specific area of analysis to inform the National Gender Plan.

### Implementation progress and reform perspectives — Macroeconomic performance
- Government scenarios:
  - (a) baseline,
  - (b) trend scenario of "business as usual",
  - (c) large and protracted external shock scenario.
  - Trend scenario implies almost no reduction in poverty.
  - Shock scenario with unchanged expenditure delivers relatively favorable social outcomes due to higher debt.
- Staff assessment:
  - Baseline reflects desired—as opposed to likely—social policy outcomes; staffs could not reconcile some outcomes of downside scenarios.
  - Staffs would have preferred a more centrist baseline.
- Growth and social outcome projections:
  - Real GDP projected to grow at about 8 percent per year (average) over 2012–16, driven by rising natural resource production (oil, minerals and timber) and strong public investment.
  - Assumes double-digit non-oil growth by the end of the medium term.
  - Concern that strategy assumes poverty reduction by over 15 percentage points in less than 5 years, which staffs view as overly ambitious.
- Fiscal financing and allocation:
  - Fiscal cost of investment priorities broadly consistent with the MTEF and natural resource revenue sufficient to finance development through domestic resources, but spending subject to pressures.
  - Spending on education and health will remain below peers with similar income per capita; non-wage current expenditure is very high.
  - Budget allocation to Governance and Promotion of Democracy projected low and unchanged—not consistent with objectives.
- Debt and fiscal sustainability:
  - Objective: cap external public debt at 30 percent of the GDP to allow further scaling up of development expenditure while maintaining a negative net external debt position.
  - Recommendation: target an overall surplus via efforts to raise non-oil revenue (broadening the tax base, improvements in tax administration) and implement spending control measures.
  - Risks to fiscal scenario: volatile oil prices and strong spending pressures.
- Natural resource governance:
  - Large-scale mineral production scheduled to come on stream in 2017.
  - Forests cover over 60 percent of the country’s landmass.
  - Staffs encourage development of a natural resource management framework covering revenue and expenditure to channel resource wealth toward human development, growth-enhancing expenditure and savings.
  - Suggest using the Bank of Central African States (BEAC) institutional framework as a reference (stabilization fund and Fund for Future Generations).
- Main downside risks identified:
  - Deterioration in the terms of trade and slow progress on structural reforms.
  - Domestic mitigation requires:
    - (i) raising quality of spending via stronger public financial management;
    - (ii) promoting inclusive growth by implementing action plan to improve business climate;
    - (iii) addressing labor market demand-supply issues and skills mismatch by raising quality of education and focusing on vocational training.

### Infrastructure
- Role and contribution:
  - Infrastructure sectors (including power, transport, communications, finance) contributed 0.5 percentage points to per capita growth over the past decade in the Republic of Congo (Pushak and Briceno-Garmendia), compared to Sub-Saharan African average contribution of 0.99 percent points.
  - Potential contribution in Congo: more than 3 percentage points a year to per capita growth, compared to an average of 2.3 percent in all of Africa.
- Current capacity and gaps:
  - Upgrading dilapidated infrastructure, particularly power, is prerequisite for economic diversification and improved social services.
  - PRSP notes importance of transport infrastructure and need for regional strategy for roads and fluvial transport corridors.
- Staff recommendations:
  - Present a more thorough analysis of each infrastructure sector, investment needed, and associated growth expected in sectors using the infrastructure.
  - Assess the investment budget based on project cost rather than available budget.
  - Create specific, attainable targets supported by concrete, evidence-based justifications.
  - Ensure targets are compatible with CEMAC Regional Development Strategy for 2025 for transport, electricity and modern telecommunications.
  - For monitoring and evaluation, quantitative result benchmarks are necessary.

### Economic diversification and private sector development
- Oil dependence and prospects:
  - Since 2000 Congo has become increasingly dependent on oil; oil sector’s share of GDP reached 68 percent in 2010.
  - Petroleum sector critical for the Government’s "Modernization and Industrialization program".
- Natural gas potential:
  - Proven natural gas reserves: about 3.5-4 trillion cubic feet (Tcf), the third largest gas resource base in sub-Saharan Africa (Ministry of Hydrocarbons).
  - Estimated 2.0 Bcm of natural gas currently flared.
  - New plant utilizes previously flared gas from the Djeno field.
  - Generation capacity increased to approximately 500 MW up from 89 MW in 2003.
  - Staffs advise attracting private sector investment in energy generation and distribution; recommend developing an attractive legal and regulatory framework with incentives for domestic natural gas use and policies to maximize local development opportunities from the petroleum sector.
- Diversification priorities and sector-by-sector notes:
  - PRSP emphasizes strengthening sectors with employment-creating and growth potential: mining, agriculture, forestry, construction and tourism.
  - Mining:
    - 2005 mining code increased exploration.
    - Examples: Mengo potash near Pointe Noire; Nabeba and Zanaga iron-ore projects.
    - Recommendation: ensure linkages between mining and other sectors; strengthen institutions for sound, efficient and transparent mineral resource management.
  - Agriculture:
    - Agricultural production far below potential; country relies extensively on imports for food consumption.
    - PRSP strategy to address gaps: (i) pre-financing purchase of inputs ahead of farming season and to wholesalers to ensure marketing; (ii) more structured financing linking producers to buyers and agro-industries/supermarkets; (iii) development of PPPs for infrastructure (irrigation, roads, storage, cooling); (iv) introduction of warehouse receipts to protect producers.
    - Staffs recommend adopting a more precise and detailed comprehensive action plan realizable by 2016 to monitor implementation.
  - Forestry:
    - About 60,000 hectares of plantations currently; plans for planting 1 million hectares in the coming decade.
    - PRSP goals: (i) bring all timber production concessions and protected areas under sustainable management plans; (ii) ensure legality of timber for exports and domestic trade; (iii) reforest/afforest 1 million hectares of savannah land with limited agricultural suitability.
    - Staffs encourage defining a specific pathway to achieve goals; recommend using heavy hardwoods for railway sleepers and river transport infrastructure; mandate certain government buildings be made of wood to stimulate domestic market.
    - Recommend strengthening associations between large timber industries and small and medium enterprises; improve capacity of the Ministry of Sustainable Development, Forest Economy and Environment.
  - Construction and tourism:
    - Identified as modern sectors with important job-creating potential.
    - PRSP addresses human capital development needs; staffs note industry-wide standards need adoption and enforcement for both sectors.
    - Basic infrastructure to develop both sectors remains lacking; building appropriate infrastructure could take at least a decade.

### Growth sectors and regional strategy
- Staffs commend PRSP for identifying key sectors with growth potential.
- Recommended priority sectors: agriculture, forestry, and services particularly related to the operations of the port of Pointe Noire.
- Rationale:
  - Sectors that require less complexity and where the country has comparative advantage can have a larger, more direct impact on poverty alleviation.
  - These sectors provide opportunities for employees to move up the skills ladder and help develop an industrial base for other sectors.
- Regional coordination:
  - Staffs recommend development of these sectors in coordination with regional partners, in line with CEMAC’s Regional Development Plan for 2025, to allow cross-country learning and larger-scale growth.

### Private sector development and SMEs
- Key finding: strengthening the private sector depends on an amenable environment for small and medium-size enterprises (SMEs).
- Major constraints identified:
  - The country ranks 181 out of 183 countries on the Doing Business Index.
  - Specific low rankings:
    - taxation: ranked 181
    - trading across borders: ranked 182
    - starting a business: ranked 175
    - electricity provision: ranked 152
    - property registration: ranked 156
    - credit access: ranked 98
    - investment protection: ranked 155
    - enforcing contracts: ranked 159
    - resolving insolvency: ranked 134
  - High regulatory burdens including multiple taxation, customs duties, and overall government bureaucracy throughout the business lifecycle.
  - High costs of starting and formalizing businesses; large informal sector employing many, notably households headed by women.
- Staff recommendations:
  - Improve efficacy of support structures including access to credit and legal protection for enterprise creation and launch.
  - Reduce regulatory burdens on entrepreneurship.
  - Develop strategy in consultation with both formal and informal business communities to prioritize and eliminate the most important barriers.
  - Reduce costs of entering the formal sector to improve access to credit and formal support structures.

### Education
- Recent progress and key statistics:
  - Gross enrollment rate in primary education increased to 114.9 percent in 2010 from 110.9 percent in 2005.
  - Girl to boy ratio rose to 95.0 percent in 2010 from 93.5 percent in 2005.
  - Primary completion rates reached 77.4 percent in 2010 up from 67.7 percent in 2005.
- Remaining challenges:
  - Universal completion (MDG) remains a challenge due to high internal inefficiency and low quality of education.
  - External efficiency is low; skills acquired do not meet labor market needs.
- Staff recommendations:
  - (i) Implement better targeted policies and programs to curb exclusion of minorities and disadvantaged groups, with particular emphasis on inclusion of women and girls.
  - (ii) Foster an education quality agenda anchored in an improved results-based management system.
  - (iii) Prioritize improving external efficiency by developing and implementing technical training programs aligned with labor market needs.
  - Empower youth through: (i) education, vocational and technical training; (ii) job creation; and (iii) provision of opportunities for leisure-time activities to develop skills for evolving labor market demand.

### Health and HIV/AIDS
- Health sector indicators (2005 DHS unless otherwise stated):
  - Life expectancy at birth: 53 years.
  - Under-five mortality: approximately 117 per 1,000 children.
  - Maternal mortality: estimated at 781 per 100,000 live births.
  - Immunization coverage: 65-70 percent of the population.
  - Utilization of health services for primary care decreased from 26.7 percent in 2005 to 23.8 percent in 2010.
  - HIV/AIDS prevalence decreased from 4.2 percent in 2003 to 3.2 percent in 2009; women remain disproportionately vulnerable.
- Staff recommendations to reinforce PRSP health strategy:
  - (i) Complete a sectoral Middle Term Expenditure Framework (MTEF) aligning budget with health priorities.
  - (ii) Complete specific analysis of children’s and reproductive health in addition to national health accounts to clarify shares of public, private, and household health expenditures.
  - (iii) Conduct detailed analysis of the Government’s health budget focusing on efficiency of public financing, primary care, and peripheral coverage.
  - (iv) Create a strategic framework for partnership with the private health sector.
  - (v) Strengthen health information system: collect baseline data, monitor progress, supplement routine data with community-based surveys.
  - (vi) Identify incentives to make redeployment attractive to health workers.
- Primary care and community programs:
  - PRSP under-prioritizes primary care and CSIs; gaps exist in tracking resources allocated to primary care.
  - Staffs recommend stronger commitment to community-level health care programs to reach vulnerable communities.
  - Example: a World Bank funded project in the Congo reached 176,944 vulnerable people with prevention-based education through local NGOs—model could target other health priorities.

### Water, sanitation, and basic social services
- Finding: provision of basic social services, clean water and sanitation remains extremely important but access remains limited.
- Staff recommendation: develop a more detailed and targeted plan to improve provision of these services.

### Social protection and vulnerability reduction
- Current allocation and coverage:
  - Social protection sector represents only 0.63 percent of the 2012 national budget.
  - Existing programs are weak and mostly target civil workers and private sector employees via contributory social insurance schemes.
- Poverty and unemployment statistics:
  - According to the 2005 Household Survey, one out of two Congolese is living under the poverty line defined as living on less than $1.25 per day.
  - Urban unemployment rate: 16.1 percent in 2009.
  - Youth unemployment (ages 15-29): 25 percent.
- Vulnerable groups under-addressed:
  - Elderly, indigenous populations, war widows, orphans, ex-combatants, amputees and war-wounded persons, and impoverished children and youth.
- Staff recommendations:
  - Use analytical work to identify sources of vulnerability and target populations, assess effectiveness of existing programs and laws (e.g., social insurance schemes, Child Protection Code, indigenous people protection law).
  - Devise better targeted and efficient mechanisms tailored to each priority vulnerable group.
  - Strengthen community organizations (with development partner support) to deliver basic community services despite current weak capacity and cultural constraints.

### Good governance and institutional consolidation
- Progress and remaining issues:
  - Considerable governance reforms and institutional strengthening have improved transparency and public financial management, but more work is needed.
  - PRSP strategies on governance are seen as too general and lacking specific goals or steps.
- Overlooked governance issues include:
  - (i) poor salaries of public servants;
  - (ii) persistence of corruption in public administration;
  - (iii) lack of resources and limited access to information for anti-corruption efforts;
  - (iv) risk that increased oil revenues could contribute to poorly selected and over-budgeted investment projects;
  - (v) poor oversight of public administration.
- Staff recommendations for public administration capacity building:
  - (i) Pursue and extend ongoing/pending structural reforms to increase management efficiency of public financial management, particularly rationalization of the public expenditure chain, in line with new PFM directives adopted by CEMAC countries on December 19, 2011.
  - (ii) Effectively execute the procurement code.
  - (iii) Dedicate funds to support new procedures for identification, evaluation and selection of public investments.
  - (iv) Clean up management of all state-owned enterprises before changing their legal status.
  - (v) Establish systematic results-based management to ensure performance and promotion.
- Decentralization:
  - Establish timetables and benchmarks, delineate responsibilities of decentralized entities, and support community participation—especially of women—in local governance.
  - For fiscal decentralization, provide technical assistance to local authorities to prevent technical complexities from impeding fiscal management.
- Civic oversight and accountability:
  - Strengthen Parliament’s information on, and control over, budget preparation and execution with support of an independent Court of Accounts via implementation of new CEMAC directives.
  - Enable access to public information by civil society through “access to information” laws and information communications technology (e.g., publishing budgets online) combined with traditional methods (e.g., radio).
  - Increase involvement of civil society and media in policy formulation and implementation via citizen consultations, civil society participation in service delivery, citizen representation on decision committees, and participatory budgeting.
  - Build oversight capacity of civil society through citizen report cards, beneficiary assessments, public expenditure tracking surveys, and third-party monitoring of budgets, procurement, and contracts.

### Monitoring and evaluation (M&E)
- Managing for development results requires linking budgets to results through MTEFs, sector strategies with results frameworks, data, and evaluation elements.
- Capacity needs:
  - Additional human, technical, and financial resources required in Direction des Etudes et de la Planification units in ministries to link budgets and progress.
- Data and surveys:
  - Government allocated 815 million FCFA in the 2012 budget for a number of surveys.
  - Risk: if rural employment surveys and mobile telephone surveys are not linked with the 2011 survey, analytical value would be significantly reduced.
  - Conseil supérieur de la statistique created in 2010 has yet to meet.
  - Overreliance on surveys reduces periodicity and geographic precision compared with routine data.
  - 2007 census data are underutilized for population projections and administrative data systems.
- Staff recommendations:
  - Strengthen capacity of the Congolese Statistical institution.
  - Accelerate preparation of a results framework and monitoring plan to serve as basis for discussion with sector ministries on budgetary allocations and sector performance.
  - Complement central M&E framework with sector M&E frameworks linked to PRSP objectives and supported by the National Statistical Development Strategy process.
  - Involve civil society and think tanks in impact assessment and pilot social accountability mechanisms such as community scorecards to track progress on infrastructure, health and education delivery.

### Conclusions, risks, and priority actions
- Overall assessment:
  - World Bank and IMF staffs believe the PRSP outlines a comprehensive framework for poverty reduction in the Republic of Congo, with emphasis on diversifying the economy away from oil and mining, providing social services, reducing vulnerability, and strengthening governance.
- Implementation risks:
  - (i) lack of commitment to implementation by relevant parties;
  - (ii) constraints on institutional and technical capacity to implement the strategy;
  - (iii) vulnerability of the country and its budget to natural resource price shocks if the economy does not diversify.
- Process and presentation recommendations:
  - Consultative process to develop the PRSP could have been more inclusive.
  - Government should consider drafting a more concise and reader-friendly version accessible to civil society and the international community.
  - Rebalance the strategy from detailed presentation of objectives to a focused, realistic set of interventions that are prioritized, sequenced and monitored.
- Priority areas to strengthen the strategy:
  - (i) Set clear, realistic targets that allow all stakeholders to work toward the same goals.
  - (ii) Prioritize and sequence goals and plans so resources can be allocated to the most important projects, especially in annual budgets and MTEFs.
  - (iii) Integrate civil society and demand for good governance to add social accountability.
  - (iv) Create systems for monitoring and evaluating specific projects undertaken.
- Institutional recommendation:
  - Creation of an independent PRSP consultative committee to monitor the Government’s overall progress with respect to the PRSP.
- Items for Executive Directors’ consultation:
  - The areas identified by staffs as priorities for strengthening the PRSP and its implementation.
  - The areas identified as key implementation risks.

*IMF/World Bank staffs analysis and recommendations as presented in the PRSP review.*

### 1. This  Joint  Staff  Advisory  Note  reviews  the  Republic  of  Congo’s  Poverty  Reduction,

### _cr12243 - 1. This  Joint  Staff  Advisory  Note  reviews  the  Republic  of  Congo’s  Poverty  Reduction,

### Background and objectives
- Reviews the Republic of Congo’s Poverty Reduction, Growth and Employment Strategy Paper (PRSP-2), completed on January 31, 2012.
- PRSP-2 follows PRSP-1 (covering 2008–11, adopted in April 2008), which was part of the “New Hope” Plan to reconstruct the country after years of conflict.
- PRSP-1 five goals: (i) the amelioration of governance and the consolidation of peace and security; (ii) the promotion of growth and macroeconomic stability; (iii) the improvement of universal access to basic social services; (iv) the improvement of the social environment and the integration of vulnerable groups; and (v) the fight against HIV/AIDS.
- PRSP-2 goal: modernize and industrialize the country; retains PRSP-1 pillars and reinvigorates (i) promotion of diversified, inclusive, employment-creating and value-added growth and (ii) equal distribution of benefits and security of growth geographically. Adds priority of respecting and protecting the environment to slow climate change and reduce harmful extraction of natural resources.
- PRSP-2 preparation: launched March 2011; six thematic groups: (i) governance; (ii) the economy; (iii) infrastructure; (iv) development and social inclusion; (v) education, training, and scientific research; (vi) balanced and sustainable development. Thematic reports adopted July 2011. Concerns raised that some participants, including civil society, felt their views were not taken into account.

### Recent developments and fiscal impact
- March 4, 2012 explosions at an ammunition depot caused hundreds of casualties and significant material damage.
- A supplementary budget submitted April 6, 2012 increased expenditures to US$6.5 billion up from US$5.3 billion; the increase financed mostly by domestic resources.
- The impact of these expenditures on the PRSP and its priority action plan to be reported in next year’s progress report.
- Government adopted a Military and Police Forces Programming Law covering 2012-2021.

### Poverty diagnostics and household trends
- The 2011 Living Standards Measurement Survey (ECOM 2011) poverty report is not yet available; the 2010 MDG statistical report’s estimate of a 1.7 percent annual poverty reduction rate cannot be evaluated at this time.
- Survey trend (2005–2011) shows positive signs; larger sample size improves disaggregation.
- Perceived main causes of poverty: unemployment, poor public sector management, lack of household financial resources.
- Urban employment and welfare indicators:
  - Employment rate: 58 percent in 2011 up from 56 percent in 2011 (as presented).
  - Ownership of televisions: 65 percent of households in 2011 up from 34 percent in 2005.
  - Primary school access: five-percentage point rise (no base year percent provided).
- Rural sector indicators:
  - Heads of households increasingly self-employed agricultural workers: 70.5 percent of households (up from 25 percentage points since 2005).
  - Over 10 percent of household heads are unemployed.
  - Ownership of televisions: 8.8 percent of households in 2011 up from 3.3 percent in 2005.
  - Canoes (means of production): 13.5 percent in 2011 up from 8.7 percent in 2005.
  - Internal migrants: 41.6 percent move from rural to urban areas.
- Gender and vulnerability:
  - Gender Inequality Index score: 0.628 for 2011.
  - HIV/AIDS rate: twice as high for women as men (expressed qualitatively).
- Staff recommendation: broaden and deepen analysis using ECOM 2011 to produce detailed poverty analysis, national health accounts, benefit-incidence analysis, public expenditure analysis, and poverty maps (using 2011 household survey and 2007 population and housing census). Gender should be both cross-cutting and a specific area of analysis to inform the National Gender Plan.

### Implementation progress and reform perspectives — Macroeconomic performance
- Government scenarios: (a) baseline, (b) trend scenario of "business as usual", (c) large and protracted external shock scenario.
  - Trend scenario implies almost no reduction in poverty.
  - Shock scenario with unchanged expenditure delivers relatively favorable social outcomes due to higher debt.
- Staff assessment:
  - Baseline reflects desired—as opposed to likely—social policy outcomes; staffs could not reconcile some outcomes of downside scenarios.
  - Staffs would have preferred a more centrist baseline.
- Growth and social outcome projections:
  - Real GDP projected to grow at about 8 percent per year (average) over 2012–16, driven by rising natural resource production (oil, minerals and timber) and strong public investment.
  - Assumes double-digit non-oil growth by the end of the medium term (timing expressed as "by the end of the medium term").
  - Concern that strategy assumes poverty reduction by over 15 percentage points in less than 5 years, which staffs view as overly ambitious.
- Fiscal financing and allocation:
  - Fiscal cost of investment priorities broadly consistent with the MTEF and natural resource revenue sufficient to finance development through domestic resources, but spending subject to pressures.
  - Spending on education and health will remain below peers with similar income per capita; non-wage current expenditure is very high.
  - Budget allocation to Governance and Promotion of Democracy projected low and unchanged—not consistent with objectives.
- Debt and fiscal sustainability:
  - Capping external public debt at 30 percent of the GDP is an objective to allow further scaling up of development expenditure while maintaining a negative net external debt position.
  - Recommendation: target an overall surplus via efforts to raise non-oil revenue (broadening the tax base, improvements in tax administration) and implement spending control measures.
  - Risks to fiscal scenario: volatile oil prices and strong spending pressures.
- Natural resource governance:
  - Large-scale mineral production scheduled to come on stream in 2017.
  - Forests cover over 60 percent of the country’s landmass.
  - Staffs encourage development of a natural resource management framework covering revenue and expenditure, to channel resource wealth toward human development, growth-enhancing expenditure and savings.
  - Suggest using the Bank of Central African States (BEAC) institutional framework as a reference (stabilization fund and Fund for Future Generations).
- Main downside risks identified:
  - Deterioration in the terms of trade and slow progress on structural reforms.
  - Domestic mitigation requires: (i) raising quality of spending via stronger public financial management; (ii) promoting inclusive growth by implementing action plan to improve business climate; (iii) addressing labor market demand-supply issues and skills mismatch by raising quality of education and focusing on vocational training.

### Infrastructure
- Role and contribution:
  - Infrastructure sectors (including power, transport, communications, finance) contributed 0.5 percentage points to per capita growth over the past decade in the Republic of Congo (Pushak and Briceno-Garmendia), compared to Sub-Saharan African average contribution of 0.99 percent points.
  - Potential contribution in Congo: more than 3 percentage points a year to per capita growth, compared to an average of 2.3 percent in all of Africa.
- Current capacity and gaps:
  - Upgrading dilapidated infrastructure, particularly power, is prerequisite for economic diversification and improved social services.
  - PRSP notes importance of transport infrastructure and need for regional strategy for roads and fluvial transport corridors.
- Staff recommendations:
  - Present a more thorough analysis of each infrastructure sector, investment needed, and associated growth expected in sectors using the infrastructure.
  - Assess the investment budget based on project cost rather than available budget.
  - Create specific, attainable targets supported by concrete, evidence-based justifications.
  - Ensure targets are compatible with CEMAC Regional Development Strategy for 2025 for transport, electricity and modern telecommunications.
  - For monitoring and evaluation, quantitative result benchmarks are necessary.

### Economic diversification and private sector development
- Oil dependence and prospects:
  - Since 2000 Congo has become increasingly dependent on oil; oil sector’s share of GDP reached 68 percent in 2010.
  - Petroleum sector critical for the Government’s "Modernization and Industrialization program".
- Natural gas potential:
  - Proven natural gas reserves: about 3.5-4 trillion cubic feet (Tcf), the third largest gas resource base in sub-Saharan Africa (Ministry of Hydrocarbons).
  - Estimated 2.0 Bcm of natural gas currently flared.
  - New plant utilizes previously flared gas from the Djeno field.
  - Generation capacity increased to approximately 500 MW up from 89 MW in 2003.
  - Staffs advise attracting private sector investment in energy generation and distribution; recommend developing an attractive legal and regulatory framework with incentives for domestic natural gas use and policies to maximize local development opportunities from the petroleum sector.
- Diversification priorities and sector-by-sector notes:
  - PRSP emphasizes strengthening sectors with employment-creating and growth potential: mining, agriculture, forestry, construction and tourism.
  - Mining:
    - 2005 mining code increased exploration.
    - Examples: Mengo potash near Pointe Noire; Nabeba and Zanaga iron-ore projects.
    - Mining can have transformational local effects via large projects and indirect jobs through local content and ancillary infrastructure.
    - Recommendation: ensure linkages between mining and other sectors; strengthen institutions for sound, efficient and transparent mineral resource management.
  - Agriculture:
    - Agricultural production far below potential; country relies extensively on imports for food consumption.
    - PRSP strategy to address gaps: (i) pre-financing purchase of inputs ahead of farming season and to wholesalers to ensure marketing; (ii) more structured financing linking producers to buyers and agro-industries/supermarkets; (iii) development of PPPs for infrastructure (irrigation, roads, storage, cooling); (iv) introduction of warehouse receipts to protect producers.
    - Staffs recommend adopting a more precise and detailed comprehensive action plan realizable by 2016 to monitor implementation.
  - Forestry:
    - About 60,000 hectares of plantations currently; plans for planting 1 million hectares in the coming decade.
    - PRSP goals: (i) bring all timber production concessions and protected areas under sustainable management plans; (ii) ensure legality of timber for exports and domestic trade; (iii) reforest/afforest 1 million hectares of savannah land with limited agricultural suitability.
    - Staffs encourage defining a specific pathway to achieve goals; recommend using heavy hardwoods for railway sleepers and river transport infrastructure; mandate certain government buildings be made of wood to stimulate domestic market.
    - Recommend strengthening associations between large timber industries and small and medium enterprises; improve capacity of the Ministry of Sustainable Development, Forest Economy and Environment.
  - Construction and tourism:
    - Identified as modern sectors with important job-creating potential.
    - PRSP addresses human capital development needs; staffs note industry-wide standards need adoption and enforcement for both sectors.
    - Basic infrastructure to develop both sectors remains lacking; building appropriate infrastructure could take at least a decade.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr12243.pdf*

### 22. Overall,  staffs  commend  the  PRSP  for  its  identification  of  the  key  sectors  with  growth

### _cr12243 - 22. Overall, staffs commend the PRSP for its identification of the key sectors with growth

### Growth sectors and regional strategy
- Staffs commend the PRSP for identifying key sectors with growth potential.
- Recommended priority sectors: agriculture, forestry, and services particularly related to the operations of the port of Pointe Noire.
- Rationale:
  - Sectors that require less complexity and where the country has comparative advantage can have a larger, more direct impact on poverty alleviation.
  - These sectors provide opportunities for employees to move up the skills ladder and help develop an industrial base for other sectors.
- Regional coordination:
  - Staffs recommend development of these sectors in coordination with regional partners, in line with CEMAC’s Regional Development Plan for 2025, to allow cross-country learning and larger-scale growth.

### Private sector development and SMEs
- Key finding: strengthening the private sector depends on an amenable environment for small and medium-size enterprises (SMEs).
- Major constraints identified:
  - The country ranks 181 out of 183 countries on the Doing Business Index.
    - Specific low rankings: taxation (ranked 181), trading across borders (ranked 182), starting a business (ranked 175), electricity provision (ranked 152), property registration (ranked 156), credit access (ranked 98), investment protection (ranked 155), enforcing contracts (ranked 159), resolving insolvency (ranked 134).
  - High regulatory burdens including multiple taxation, customs duties, and overall government bureaucracy throughout the business lifecycle.
  - High costs of starting and formalizing businesses; large informal sector employing many, notably households headed by women.
- Staff recommendations:
  - Improve efficacy of support structures including access to credit and legal protection for enterprise creation and launch.
  - Reduce regulatory burdens on entrepreneurship.
  - Develop strategy in consultation with both formal and informal business communities to prioritize and eliminate the most important barriers.
  - Reduce costs of entering the formal sector to improve access to credit and formal support structures.

### Education
- Recent progress and key statistics:
  - Gross enrollment rate in primary education increased to 114.9 percent in 2010 from 110.9 percent in 2005.
  - Girl to boy ratio rose to 95.0 percent in 2010 from 93.5 percent in 2005.
  - Primary completion rates reached 77.4 percent in 2010 up from 67.7 percent in 2005.
- Remaining challenges:
  - Universal completion (MDG) remains a challenge due to high internal inefficiency and low quality of education.
  - External efficiency is low; skills acquired do not meet labor market needs.
- Staff recommendations:
  - (i) Implement better targeted policies and programs to curb exclusion of minorities and disadvantaged groups, with particular emphasis on inclusion of women and girls.
  - (ii) Foster an education quality agenda anchored in an improved results-based management system.
  - (iii) Prioritize improving external efficiency by developing and implementing technical training programs aligned with labor market needs.
  - Empower youth through: (i) education, vocational and technical training; (ii) job creation; and (iii) provision of opportunities for leisure-time activities to develop skills for evolving labor market demand.

### Health and HIV/AIDS
- Health sector indicators (2005 DHS unless otherwise stated):
  - Life expectancy at birth: 53 years.
  - Under-five mortality: approximately 117 per 1,000 children.
  - Maternal mortality: estimated at 781 per 100,000 live births.
  - Immunization coverage: 65-70 percent of the population.
  - Utilization of health services for primary care decreased from 26.7 percent in 2005 to 23.8 percent in 2010.
  - HIV/AIDS prevalence decreased from 4.2 percent in 2003 to 3.2 percent in 2009; women remain disproportionately vulnerable.
- Staff recommendations to reinforce PRSP health strategy:
  - (i) Complete a sectoral Middle Term Expenditure Framework (MTEF) aligning budget with health priorities.
  - (ii) Complete specific analysis of children’s and reproductive health in addition to national health accounts to clarify shares of public, private, and household health expenditures.
  - (iii) Conduct detailed analysis of the Government’s health budget focusing on efficiency of public financing, primary care, and peripheral coverage.
  - (iv) Create a strategic framework for partnership with the private health sector.
  - (v) Strengthen health information system: collect baseline data, monitor progress, supplement routine data with community-based surveys.
  - (vi) Identify incentives to make redeployment attractive to health workers.
- Primary care and community programs:
  - PRSP under-prioritizes primary care and CSIs; gaps exist in tracking resources allocated to primary care.
  - Staffs recommend stronger commitment to community-level health care programs to reach vulnerable communities.
  - Example cited: a World Bank funded project in the Congo reached 176,944 vulnerable people with prevention-based education through local NGOs—model could target other health priorities.

### Water, sanitation, and basic social services
- Finding: provision of basic social services, clean water and sanitation remains extremely important but access remains limited.
- Staff recommendation: develop a more detailed and targeted plan to improve provision of these services.

### Social protection and vulnerability reduction
- Current allocation and coverage:
  - Social protection sector represents only 0.63 percent of the 2012 national budget.
  - Existing programs are weak and mostly target civil workers and private sector employees via contributory social insurance schemes.
- Poverty and unemployment statistics:
  - According to the 2005 Household Survey, one out of two Congolese is living under the poverty line defined as living on less than $1.25 per day.
  - Urban unemployment rate: 16.1 percent in 2009.
  - Youth unemployment (ages 15-29): 25 percent.
- Vulnerable groups under-addressed:
  - Elderly, indigenous populations, war widows, orphans, ex-combatants, amputees and war-wounded persons, and impoverished children and youth.
- Staff recommendations:
  - Use analytical work to identify sources of vulnerability and target populations, assess effectiveness of existing programs and laws (e.g., social insurance schemes, Child Protection Code, indigenous people protection law).
  - Devise better targeted and efficient mechanisms tailored to each priority vulnerable group.
  - Strengthen community organizations (with development partner support) to deliver basic community services despite current weak capacity and cultural constraints.

### Good governance and institutional consolidation
- Progress and remaining issues:
  - Considerable governance reforms and institutional strengthening have improved transparency and public financial management, but more work is needed.
  - PRSP strategies on governance are seen as too general and lacking specific goals or steps.
  - Overlooked governance issues include:
    - (i) poor salaries of public servants;
    - (ii) persistence of corruption in public administration;
    - (iii) lack of resources and limited access to information for anti-corruption efforts;
    - (iv) risk that increased oil revenues could contribute to poorly selected and over-budgeted investment projects;
    - (v) poor oversight of public administration.
- Staff recommendations for public administration capacity building:
  - (i) Pursue and extend ongoing/pending structural reforms to increase management efficiency of public financial management, particularly rationalization of the public expenditure chain, in line with new PFM directives adopted by CEMAC countries on December 19, 2011.
  - (ii) Effectively execute the procurement code.
  - (iii) Dedicate funds to support new procedures for identification, evaluation and selection of public investments.
  - (iv) Clean up management of all state-owned enterprises before changing their legal status.
  - (v) Establish systematic results-based management to ensure performance and promotion.
- Decentralization:
  - Staffs recommend establishing timetables and benchmarks, delineating responsibilities of decentralized entities, and supporting community participation—especially of women—in local governance.
  - For fiscal decentralization, provide technical assistance to local authorities to prevent technical complexities from impeding fiscal management.
- Civic oversight and accountability:
  - Address weak parliamentary oversight and low citizen participation.
  - Staff-recommended emphasis:
    - (i) Strengthen Parliament’s information on, and control over, budget preparation and execution with support of an independent Court of Accounts via implementation of new CEMAC directives.
    - (ii) Enable access to public information by civil society through “access to information” laws and information communications technology (e.g., publishing budgets online) combined with traditional methods (e.g., radio).
    - (iii) Increase involvement of civil society and media in policy formulation and implementation via citizen consultations, civil society participation in service delivery, citizen representation on decision committees, and participatory budgeting.
    - (iv) Build oversight capacity of civil society through citizen report cards, beneficiary assessments, public expenditure tracking surveys, and third-party monitoring of budgets, procurement, and contracts.

### Monitoring and evaluation (M&E)
- Managing for development results requires linking budgets to results through MTEFs, sector strategies with results frameworks, data, and evaluation elements.
- Capacity needs:
  - Additional human, technical, and financial resources required in Direction des Etudes et de la Planification units in ministries to link budgets and progress.
- Data and surveys:
  - Government allocated 815 million FCFA in the 2012 budget for a number of surveys.
  - Risk: if rural employment surveys and mobile telephone surveys are not linked with the 2011 survey, analytical value would be significantly reduced.
  - Conseil supérieur de la statistique created in 2010 has yet to meet.
  - Overreliance on surveys reduces periodicity and geographic precision compared with routine data.
  - 2007 census data are underutilized for population projections and administrative data systems.
- Staff recommendations:
  - Strengthen capacity of the Congolese Statistical institution.
  - Accelerate preparation of a results framework and monitoring plan to serve as basis for discussion with sector ministries on budgetary allocations and sector performance.
  - Complement central M&E framework with sector M&E frameworks linked to PRSP objectives and supported by the National Statistical Development Strategy process.
  - Involve civil society and think tanks in impact assessment and pilot social accountability mechanisms such as community scorecards to track progress on infrastructure, health and education delivery.

### Conclusions, risks, and priority actions
- Overall assessment:
  - World Bank and IMF staffs believe the PRSP outlines a comprehensive framework for poverty reduction in the Republic of Congo, with emphasis on diversifying the economy away from oil and mining, providing social services, reducing vulnerability, and strengthening governance.
- Implementation risks:
  - (i) lack of commitment to implementation by relevant parties;
  - (ii) constraints on institutional and technical capacity to implement the strategy;
  - (iii) vulnerability of the country and its budget to natural resource price shocks if the economy does not diversify.
- Process and presentation recommendations:
  - Consultative process to develop the PRSP could have been more inclusive.
  - Government should consider drafting a more concise and reader-friendly version accessible to civil society and the international community.
  - Rebalance the strategy from detailed presentation of objectives to a focused, realistic set of interventions that are prioritized, sequenced and monitored.
- Three priority areas to strengthen the strategy:
  - (i) Set clear, realistic targets that allow all stakeholders to work toward the same goals.
  - (ii) Prioritize and sequence goals and plans so resources can be allocated to the most important projects, especially in annual budgets and MTEFs.
  - (iii) Integrate civil society and demand for good governance to add social accountability.
  - (iv) Create systems for monitoring and evaluating specific projects undertaken.
- Institutional recommendation:
  - Staffs recommend creation of an independent PRSP consultative committee to monitor the Government’s overall progress with respect to the PRSP.
- Items for Executive Directors’ consultation:
  - The areas identified by staffs as priorities for strengthening the PRSP and its implementation.
  - The areas identified as key implementation risks.

*IMF/World Bank staffs analysis and recommendations as presented in the PRSP review.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2012/_cr12243.pdf_