Five Takeaways from Democratic Republic of the Congo's IMF Program
IMF News, December 23, 2019
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- Published: December 23, 2019
Background and context
- The IMF approved a loan under its Rapid Credit Facility (RCF) combined with a Staff-Monitored Program (SMP) until May 2020 to help the Democratic Republic of the Congo (DRC) strengthen its fragile economy.
- The IMF’s loan is valued at about $368 million.
- The DRC faces long-standing challenges including poor governance, a recent decline in commodity prices, the worst Ebola outbreak in its history, and a sharp fall in international reserves (to the equivalent of about only one week of imports).
- The previous IMF financial arrangement with the DRC ended in 2012; the economic assessment for the country was concluded in August 2019 after a three-year delay.
- The IMF engagement follows a recent peaceful political transition and is intended to restore economic stability and improve governance and transparency.
Fast facts and key statistics
- Real GDP (2019 projected): 4.3%
- Per capita income: $470
- Population): 97.879 million
- Date of Membership: : September 28, 1963
Program objectives and policy commitments
- Main program aims:
- Rebuild international reserves.
- Restore fiscal discipline.
- Improve governance and transparency.
- Fiscal measures under the RCF/SMP:
- Strengthen domestic revenue collection.
- Limit spending to available resources—including for new initiatives like the free basic education—through mandatory spending caps.
- End central bank financing of the deficit and rely on the issuance of treasury bills to manage short-term liquidity needs.
- Monetary and exchange rate policies:
- Aim to keep inflation low.
- Maintain adequate international reserve buffers.
- Financial sector measures:
- Strengthen financial sector stability through continued improvement of the central bank’s banking supervision capacity.
Governance and transparency priorities
- Key governance actions requested:
- Improve governance, increase transparency, and fight corruption, especially in the extractive sector.
- Publish all new mining contracts.
- Publish audits of state-owned enterprises.
- Political commitments:
- Authorities are committed to improving the business climate and fostering inclusive growth.
- President Félix Tshisekedi’s 100-day program emphasizes building infrastructure (especially roads) and a free basic education initiative.
External financing and development partner coordination
- Potential follow-up financing:
- An additional step may take place in the second half of 2020, with a possible second loan to the DRC under the Extended Credit Facility (ECF).
- A second IMF loan could help catalyze budget support from other development partners like the World Bank and the African Development Bank.
- World Bank engagement:
- The World Bank is finalizing a $1 billion three-year operation to support an initiative to introduce free basic education into the country.
Next steps and structural reform agenda
- The SMP should provide time to design a deeper structural reform program aimed at delivering economic gains to a broader segment of the population and tackling deep-rooted social needs; this program would be eventually supported by a second IMF loan.
- Assessments and exercises informing medium-term plans:
- Recommendations from an ongoing governance assessment.
- Upcoming safeguard assessment missions.
- A Public Expenditure and Financial Accountability exercise led by the World Bank.
Source: Five Takeaways from Democratic Republic of the Congo's IMF Program — IMF (web landing page).