IMF Staff Completes Virtual 2021 Article IV Mission to the Republic of Congo
IMF News, July 23, 2021
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- Published: July 23, 2021
Economic outlook and near-term projections
- The Covid-19 pandemic and oil price collapse led to an 8.2 percent economic contraction in 2020.
- Recovery in 2021 is described as elusive, with expectations of a 0.2 percent contraction in economic activity in 2021.
- Impetus from the strong oil price rebound has been broadly offset by:
- continued weaknesses in oil production,
- lack of dynamism in the non-oil economy due to pandemic mitigation measures,
- persistent domestic payment arrears,
- underlying structural weaknesses.
- Inflation is subdued, anticipated to average 2.0 percent in 2021.
- Non-oil sectors are expected to gradually recover in the years ahead as diversification, social inclusion, and climate adaptation efforts take hold.
Fiscal policy, budgeting, and debt vulnerabilities
- The 2021 non-oil primary deficit is expected to widen to 17.2 percent of non-oil GDP, driven by spending on social assistance, healthcare (including vaccination), and education.
- Recent reforms initiated in 2019 have resulted in steady reductions of oil-related transfers to the refinery and to Congo Electric Power Company (CEC).
- Implemented domestic revenue-enhancing measures—such as the introduction of electronic payments and a broadening of the tax base—continue to support non-oil revenues despite the economic contraction.
- Oil revenue windfalls are being used to finance the deficit and repay domestic arrears and external debt, including recently restructured external commercial loans.
- Authorities are encouraged to:
- continue addressing significant debt vulnerabilities by strengthening debt management and resolving external payments arrears,
- pursue medium-term budgetary discipline,
- gradually phase out subsidies to the national oil refinery,
- improve the billing process and coverage to reflect actual electricity consumption to recover production costs while applying social assistance to shelter the poor,
- formulate a plan to settle remaining domestic arrears,
- advance public investment management.
- Exclusive use of concessional financing is recommended to help contain public debt.
- Greater support from development partners is highlighted as essential to reduce fiscal vulnerabilities and increase fiscal space for investment in infrastructure, capacity, and reform implementation.
Structural reforms, governance, and public financial management
- Structural reforms are advancing but slowly.
- Authorities intend to:
- finalize the audit of domestic arrears for 2017-18,
- submit to parliament amendments to the anti-corruption law,
- submit new legislation reforming the Court of Auditors.
- The mission encourages continued strengthening of public financial management through:
- close monitoring of spending,
- auditing expenses related to the pandemic,
- accurate centralized collection of oil and non-oil revenues,
- efficiency gains and increased transparency in the management of public resources.
- Advancing structural reforms aimed at improved economic management, governance, and support for private sector activity—including raising access to finance and increased social and infrastructure spending—are identified as critical for strengthening external competitiveness and economic recovery.
Health response and vaccinations
- Vaccination delivery is progressing, notwithstanding a slow start.
- Healthcare spending in 2021 includes vaccination and is contributing to the widening non-oil primary deficit.
Mission engagement
- The IMF team was led by Pritha Mitra, Mission Chief for the Republic of Congo, and conducted virtual discussions with the Congolese authorities during July 14 to 21, 2021 on the 2021 Article IV consultation.
- The mission met with:
- Finance Minister Mr. Rigobert Roger Andely,
- Minister of the Economy, Planning and Regional Integration Madame Ghislaine Ingrid Ebouka Babackas,
- Minister for the Environment and Sustainable Development, Madame Arlette Soudan-Nonault,
- other senior government officials,
- representatives of civil society, the private sector, and development partners.
- The mission thanks the Congolese authorities for rich and productive discussions and excellent cooperation.
- The mission will not result in a Board discussion; views expressed are those of IMF staff.
Press Release No. 21/226 — IMF Staff Completes Virtual 2021 Article IV Mission to the Republic of Congo