Democratic Republic of Congo and IMF Mission Reach an Agreement ad-referendum on Financial Assistance Under the Rapid Credit Facility and a Staff-Monitored Program

IMF News, November 15, 2019

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An IMF team, headed by Mauricio Villafuerte, visited Kinshasa, Democratic Republic of Congo (DRC), over November 6–15, 2019 and reached an agreement ad-referendum with the Congolese authorities on a reform program that could be supported by the IMF’s Rapid Credit Facility (RCF), coupled with a Staff-Monitored Program (SMP) through end-May 2020.
Subject to IMF management approval, the staff-level agreement on the RCF disbursement is expected to be submitted to the IMF Executive Board for its consideration in mid-December 2019.
The RCF provides rapid financial support in a single, up-front payout for low-income countries facing urgent financing needs.
An SMP is an informal agreement between country authorities and Fund staff to monitor the implementation of the authorities’ economic program; SMPs do not entail financial assistance or endorsement by the IMF Executive Board.

GDP growth is projected to weaken to 3.2 percent in 2020 and 4.5 percent in 2019, reflecting a slowdown in mining production.
Non-extractive GDP continues to accelerate, spurred in part by increased government spending.
Poverty remains pervasive and is exacerbated by armed conflict and deadly epidemics in some areas of the country.
The central bank (BCC) has made advances to the government, which have led to an erosion of its international reserves to critically low levels.

Weakening economic growth driven by a slowdown in mining production.
Pervasive poverty, worsened by armed conflict and epidemics.
Fragmented taxation system that discourages private investment.
Fragile judiciary undermining business environment and governance.
Eroded international reserves linked to central bank advances to the government.

Strengthen macroeconomic stability, reinforce international reserves, and advance key structural reforms to address poor governance, a difficult business environment, and pervasive poverty.
Boost revenue mobilization and rein in and prioritize expenditures to anchor macroeconomic stability.
Central bank (BCC) immediate focus:
- Build up international reserves while preserving low inflation.
- Transfer of its foreign currency deposits held with domestic commercial banks to its own bank accounts abroad to contribute to increase international reserves.
- Take steps to denominate banks’ mandatory reserves in the currency of the respective deposits to strengthen financial stability.
- Continue to use instruments at its disposal to maintain low inflation and to intervene in the foreign exchange market to smooth out excess volatility.
Improve governance and the business climate, with emphasis on management of natural resources and of state-owned enterprises.
Comply with requirements of the Extractive Industries Transparency Initiative (EITI).
Simplify taxation and reduce the tax burden.
Launch a national dialogue and seek appropriate assistance to address weaknesses in the judiciary system.

The SMP would provide an opportunity for the authorities, with assistance from their partners, to develop a deeper structural reform agenda that could eventually be implemented under a medium-term Fund-supported program.

The IMF team met with Prime Minister Ilunga Ilunkamba, Minister of Finance Sele Yalaghuli, Central Bank of Congo Governor Mutombo Mwana Nyembo, other senior government officials as well as representatives of civil society, private sector, and development partners.
At the end of the mission, Mr. Villafuerte issued a statement emphasizing the need to strengthen macroeconomic stability, reinforce international reserves, and advance structural reforms to address deep-seated issues related to poor governance, a difficult business environment, and pervasive poverty.

Press Release No. 19/421, November 15, 2019, IMF Communications Department.