IMF Staff Completes 2016 Article IV Mission to the Republic of Congo

IMF News, November 8, 2016

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The Republic of Congo’s economy "continues to be severely impacted by the decline in international oil prices."
Economic growth slowed to 2.3 percent in 2015 and "is projected to be lower still in 2016."
Inflation "hit 4 percent in July 2016 (year on year)" and "is expected to moderate and to average about 2.5 percent over the medium term."
International oil prices are expected to remain low and "the remaining lifetime of oil reserves is limited," shaping medium-term policy needs.

Fiscal deficit "exceeded 18.5 percent of GDP in 2015," an increase "up by 10 percent of GDP from 2014."
Public debt "rose above 70 percent of GDP at the end of 2015"—breaching the CEMAC convergence criterion.
International reserves and government deposits "have declined sharply" and have "fallen below levels that are typically recommended for countries with pegged exchange rates and undiversified current account inflows."
The financial sector has experienced rising nonperforming loans but "remains broadly resilient."
2016 saw "substantial macroeconomic imbalances" driven by "lower-than-expected oil revenues and continued elevated spending," with increased recourse to fiscal and external buffers and limited financing options.

Mission dates: "visited Brazzaville during October 25-November 7, 2016."
Growth: "2.3 percent in 2015."
Inflation: "4 percent in July 2016 (year on year)"; medium-term average "about 2.5 percent."
Fiscal deficit: "exceeded 18.5 percent of GDP in 2015"; change "up by 10 percent of GDP from 2014."
Public debt: "rose above 70 percent of GDP at the end of 2015."
Executive Board consideration: "expected to consider the staff report on the 2016 Article IV consultation in January 2017."

Implement stronger fiscal adjustment than envisaged in the draft 2017 budget to:
- Support fiscal sustainability and mitigate macroeconomic stability risks.
- Support reserve adequacy at the CEMAC regional level.
Anchor medium-term fiscal adjustment on a further reduction in the non-oil primary deficit.
Adopt realistic expenditure plans to:
- Prevent the emergence of new arrears.
- Safeguard social spending and counterpart funding for development projects.
Continue efforts to rationalize public expenditures from their unusually high levels in recent years.
Improve the quality and efficiency of capital expenditures.
Mobilize non-oil revenue by:
- Broadening the tax base through a systematic review and selective elimination of tax exemptions.
- Strengthening tax and customs administration.
Over the medium term, pursue a multi-pronged approach to support diversification aimed at sustainable and inclusive growth, including:
- Medium-term perspective in fiscal planning and improved commitment control to prevent accumulation of domestic arrears and curtail increases in public debt.
- A clear strategy for the repayment of existing arrears.
- Improvements to the business environment, including strengthening governance and transparency and improving access to finance, to underpin private sector development and diversification.

The mission met with senior officials including the Prime Minister; State Minister of Economy, Industrial Development, and Promotion of the Private Sector; Minister of Finance, Budget, and Public Portfolio; Minister of Planning, Statistics and Integration; senior officials of the National Directorate of the Central Bank; and representatives of parliament, civil society, the private sector, and development partners.
"The IMF stands ready to continue to work with the Congolese authorities to address their policy challenges."
Staff will prepare a report based on the mission’s preliminary findings that, subject to management approval, "will be presented to the IMF's Executive Board for discussion and decision."

IMF press release — November 8, 2016.