Transcript of an IMF Book Forum--Postconflict Economics in Sub-Saharan Africa: Lessons from the Democratic Republic of the Congo

IMF News, May 5, 2005

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Bibliographic details

• Published: May 5, 2005

Overview

• Event: IMF Book Forum on "Postconflict Economics in Sub-Saharan Africa: Lessons from the Democratic Republic of the Congo"
• Date and place: Thursday, May 5, 2005, Washington, D.C.
• Moderator: Mr. Bio‑Tchané, Director of the African Department
• Presenters/authors on the panel included Jean Clément, Ragnar Gudmundsson, Wim Fonteyne, Jacob Gons, Bernard Laurens, Benoit Mercereau, and Xavier Devictor (World Bank).
• Contextual scale: about half of the 44 Sub‑Saharan African countries experienced a period of conflict in the last two decades; one out of three Africans affected directly or indirectly.

Key findings on causes of conflict

• Main drivers: slow growth, weak institutions, corruption, and poverty (Charles Yartey chapter).
• Natural resource risk: countries with abundant natural resources face a higher risk of conflict; calls for greater transparency in resource management (Paul Collier and Anke Hoeffler confirmation).
• Revenue constraint: low revenue-to-GDP ratios undermine governments’ ability to pay wages and provide basic services, increasing conflict risk (Benoît Mercereau chapter).
• Regional contagion: conflict in the DRC negatively affected real GDP growth in neighboring countries such as the Central African Republic.

Empirical scale and human cost (DRC / Great Lakes)

• Major conflict period referenced: 1998 to 2002 in the Great Lakes region.
• Human toll cited: three million deaths; a million displaced people.
• Additional impacts: destruction of schools and hospitals; increased pandemics such as HIV/AIDS; life expectancy plunged.
• Probability of war in the Great Lakes region: 27 percent versus 9 percent in Sub‑Saharan Africa.
• Reported wartime death rates comparison (participant comment): 1,000 deaths a day vs 5,000 to 7,000 previously.

DRC macroeconomic turnaround and key statistics

• Hyperinflation trajectory: more than 600 percent in 2000 declined to 9.7 percent at end‑2004.
• Growth: real GDP growth reported as 7 percent in 2004 after 14 years of negative growth.
• Debt relief: external debt stock reduced by about 80 percent.
• Capital flows: direct foreign investment and foreign aid increased to more than $1 billion in 2004.
• Administrative/geographic facts: DRC is the third largest country in Africa, one and a half the size of Western Europe, population cited as 56 million, and 11 provinces.

Lessons and policy recommendations (synthesized from presentations)

• Early, proactive, coordinated international engagement
  • Early IMF and World Bank engagement—even during conflict—was critical to creating momentum and catalyzing support.
  • Personal contacts with government, rebel movements, and civil society helped establish communication channels and common diagnosis.
• National ownership and openness
  • Broad national ownership (e.g., inter‑Congolese dialogue with ~350 representatives) is crucial.
  • Openness, including frequent press contact, supports implementation and consolidation of peace.
• Economic pillar of peace agreements
  • Peace agreements must include an economic pillar tailored to postconflict realities; absence of an economic pillar risks relapse.
• Flexibility and sequencing of policies
  • Postconflict policy must be flexible; first‑best policies may not be immediately appropriate.
  • Use transition‑appropriate instruments while administrative capacity is rebuilt.
• Technical assistance and administrative capacity
  • Timely technical assistance is crucial given weakened administrative capacity; continuous monitoring and frequent program reviews are required.
• Aid sequencing and persistence
  • Aid flows should be well sequenced and sustained over time: humanitarian aid immediately, followed by reconstruction aid focused on institutions, services, and infrastructure.
  • Study finding cited: foreign aid tends to be most effective in stimulating growth five years after the end of a conflict (World Bank study referenced).
• Security, demobilization, and reintegration
  • Funding and timely implementation of demobilization and integration programs (regional and national) and formation of a professional, accountable army and police are essential.
• Financial sector and exchange regime
  • Rebuilding the financial system and payment systems facilitates investment and macro stability; unify foreign exchange regimes and liberalize exchange rate policies to break hyperinflation cycles (Wim Fonteyne).
  • Strengthen prudential regulation and banking supervision to reassure investors and prevent illegal accumulation of wealth that could finance conflict (Bernard Laurens).

Operational policy implications and sequencing (practical measures)

• Revenue mobilization
  • Restore tax base and rebuild tax and customs administrations; prioritize broad‑based, equitable, simple, and monitorable instruments (including border taxes) that can scale with capacity.
• Public expenditure focus
  • Immediate public spending should prioritize basic social services, infrastructure, and fair allocation across regions/ethnic groups.
  • Strengthen public procurement transparency (DRC created BECECE to ensure transparent bidding).
• Structural reforms sequencing
  • Emphasize removing major economic distortions, price liberalization, improving legal/regulatory frameworks, and anti‑corruption measures; keep reforms simple and sequenced.
• Donor coordination and modalities
  • Donor involvement should be predictable and sustained; complement humanitarian aid with project aid, direct budget support, and debt relief.
  • Technical assistance should be frontloaded and sustained to build provincial and local administrative capacity (importance of buttressing provincial administrations across 11 provinces).

Contested issues and operational tradeoffs raised in Q&A

• Elections logistics and timing
  • Original election target was June 2005; postponement argued necessary to ensure appropriate logistical conditions across a vast country.
  • Practical constraints include enormous logistical challenges to reach remote areas.
• Small arms proliferation
  • Problem includes legacy stock from collapse of the Eastern bloc; supply reduction via producer pressure unlikely to fully resolve the issue.
  • Approaches such as buyback programs and tighter border controls are ongoing and described as work in progress.
• IMF postconflict financing modalities and concessionality
  • Debate over Emergency Postconflict Assistance (EPCA) terms versus PRGF/IDA concessionality.
  • EPCA repayment terms cited as three years with non‑subsidized interest rates; concerns that countries failing to transition to a PRGF could face higher debt burdens and arrears (Guinea‑Bissau example discussed).
  • Mitigation example: topping up the PRGF first tranche to repay postconflict assistance (Guinea‑Bissau case described).
  • Panelists emphasized the need for up‑front capacity building and grant‑like support where needed (Liberia approach contrasted with past cases).
• Regional and political dimensions
  • Need for a cross‑sector UN/IFIs task force to integrate political, military, security, economic, and financial perspectives in the Great Lakes region.
  • IMF/World Bank neutrality and engagement: support focuses on practical problem solving while consulting mandated political actors and multilateral partners.
• Gender and inclusion
  • The PRSP framework includes policies addressing gender and education goals (e.g., Millennium Goals to improve girls’ school attendance).
  • Comment noted absence of women on the forum panel despite women contributors to the broader team.

Outstanding challenges for the DRC highlighted by panelists

• Consolidate national ownership of the economic program across diverse transitional coalition.
• Further develop culture of good governance and transparency beyond institutional reforms.
• Ensure timely financial support for security sector reforms and demobilization/integration programs.
• Maintain macroeconomic stability and continue structural reforms while adapting to evolving political conditions.
• Build administrative capacity at provincial and local levels so peace dividends reach the majority.
• Organize transparent and credible elections to avoid political uncertainty and social destabilization.

Transcript of an IMF Book Forum—Postconflict Economics in Sub-Saharan Africa: Lessons from the Democratic Republic of the Congo, May 5, 2005.

References

• Democratic Republic of the Congo and the IMF
• Guinea-Bissau and the IMF
• The IMF and Good Governance -- A Factsheet
• The IMF's Poverty Reduction and Growth Facility (PRGF) -- A Factsheet
• Technical Assistance -- A Factsheet
• Transcripts
• Postconflict Economics in Sub-Saharan Africa: Lessons from the Democratic Republic of the Congo
• PRESS CENTER
• https://www.imf.org/en/home