Press Release: Statement by an IMF Staff Mission on the 2012 Article IV Consultation with the Democratic Republic of the Congo

IMF News, June 25, 2012

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Canonical URL: Press Release: Statement by an IMF Staff Mission on the 2012 Article IV Consultation with the Democratic Republic of the Congo

Mission dates: visited Kinshasa June 7-21, 2012 to undertake the 2012 Article IV consultation discussions and review performance under the authorities’ Extended Credit Facility (ECF) arrangement.
Principal interlocutors:
- President of the Senate Léon Kengo Wa Dondo
- President of the National Assembly Aubin Minuku
- Prime Minister Matata Ponyo Mapon
- Vice-Prime Minister and Minister of Budget Daniel Mukoko Samba
- Minister Delegate to the Prime Minister for Finance Patrice Kitebi Kibol Mvul
- Central Bank of the Congo Governor Jean-Claude Masangu
- Other senior Ministers and government officials
Additional meetings: representatives from the private sector, civil society, and the donor community.
Statement issuer at end of mission: Mr. Robert York.

Recent performance: economic performance improved recently; DRC economy largely shielded from the economic crisis in Europe due to low level of global integration.
Constraint identified: low level of global integration is beneficial short term but a significant constraint on development over the medium term.
Medium-term priorities to enable closer integration:
- diversify the economy
- invest in infrastructure
- improve the business environment to attract investment
Short-term policy priority: improve macroeconomic buffers through further fiscal consolidation and build-up of international reserves.
International reserves noted level: in 2011 reached an equivalent of 8 weeks of non-aid related imports.
External vulnerability concern: build larger buffers to reduce the economy’s external vulnerability.

Recommendation: maintain the broad thrust of fiscal policy that underpinned better economic performance.
Monetary financing: advised the government to ensure no (net) financing of the fiscal deficit by the Central Bank of the Congo (BCC) as an appropriate anchor for fiscal policy over the medium term.
Revenue mobilization: efforts to mobilize more domestic revenue are the only means currently to meet human and infrastructure development needs.
Specific fiscal measures urged:
- changes to tax policies
- tax and customs administration reform in the natural resource sector (noted as particularly important)

BCC reforms: mission welcomes ongoing reforms to enhance the independence and operating efficiency of the BCC.
Policy options discussed: anchoring inflation in DRC’s highly dollarized economy.
Authorities’ view: concurred with mission that continuation of economic policies supporting the current stable environment would encourage use of the local currency (i.e., de-dollarization).
Programmatic advice: actions by the BCC to ensure monetary aggregates evolve in line with the program.

Risk highlighted: external debt and state guarantees could quickly grow beyond levels considered sustainable.
Policy guidance to preserve sustainability:
- consider only projects with a high economic and social return
- seek external borrowing on highly concessional terms

GDP growth projection: about 7 percent in 2012 driven by the mining sector.
Inflation outlook: could reach its single-digit target by the end of this year on account of the recent slowdown in global food and fuel prices, and if macroeconomic policies continue their current thrust.
Fiscal projection: slight decline in the domestic fiscal deficit to about 1 percent of GDP in 2012.
Current account projection: expected to deteriorate in 2012 to about 12 percent of GDP from 8.3 percent in 2011 as a result of declining commodity prices.
Downside risks:
- further deterioration in the country’s terms of trade if the global economy weakens
- uncertainty generated by domestic security concerns in the Eastern part of the country destabilizing the economy

Conditions for IMF reviews: a budget consistent with the thrust of policies supported under the ECF arrangement and further progress with governance and transparency reforms in extractive industries would support the mission’s recommendation for the completion of the fourth and fifth reviews of the program.
Timing: in this event, the IMF’s Executive Board could discuss the 2012 Article IV Consultation and fourth and fifth reviews of the DRC’s program in early September 2012.

International Monetary Fund