Washington, DC – April 20, 2022:
An International Monetary Fund (IMF) team led by Pritha Mitra, Mission
Chief for the Republic of Congo, conducted a virtual mission with the
Congolese authorities during March 31-April 18, 2022, to discuss the first
review of the three-year arrangement for the Republic of Congo under the
Extended Credit Facility Arrangement.
At the end of the mission, Ms. Mitra issued the following statement:
"The IMF team reached a staff-level agreement with the authorities of the
Republic of Congo on the completion of the first review under the Extended
Credit Facility (ECF), which is subject to the approval of the IMF
Executive Board.
"Economic recovery is gaining momentum but remains fragile against the
backdrop of the COVID-19 pandemic and global consequences of the war in
Ukraine. Real GDP growth is expected to strengthen to 4.3 percent in 2022,
driven by improved oil production and momentum from agriculture and mining,
as well as a continued vaccine rollout and domestic arrears payments with
the latter contributing to reduced non-performing loans and financial
sector stability. More vigorous economic activity is being held back by
rising inflation, projected at 3.5 percent, as global food and oil prices
surge owing to the Ukraine war. High oil prices, if sustained, will benefit
the economy but large uncertainties loom around oil price projections.
"Debt is assessed as sustainable following substantial debt restructuring
and implementation of prudent fiscal policy. Nevertheless, debt
vulnerabilities remain large especially amid high oil price volatility.
Pending clearance of external arrears, debt is classified as being in
“distress”. Progress in procurement and management of debt and public
finances, including public investment, will be essential to avoiding
accumulation of domestic and external arrears and improving spending
efficiency and quality. Coupled with implementation of the new
anti-corruption architecture, the debt management reforms will also help
cement recent gains in governance and transparency.
"Fiscal policy will need to maintain the delicate balance between
supporting a robust economic recovery while safeguarding debt
sustainability. Revenue mobilization and rationalization of inefficient
subsidies to state-owned enterprises will be key to this process—allowing
for gradual fiscal consolidation while raising spending on social
assistance, health care, education, and infrastructure. This expenditure
prioritization will support higher, more inclusive, and resilient growth.
To this end, on-going tax administration reforms must be complemented by
stepped up collection of tax arrears, significant removal of tax and
customs exemptions, and concrete measures to raise oil-related fiscal
revenues. Execution of the 2022 budget appropriately targets a deficit of
15.3 percent of non-oil GDP.
"Against this backdrop, after financing debt service, part of oil revenue
windfalls should finance tax deferrals initiated during the pandemic and
stepped up social assistance to help, respectively, businesses and low- and
middle-income households cope with high inflation. Acceleration of measures
to facilitate access to credit for small businesses will complement these
measures. In 2022, any remaining oil revenue windfalls should be used to
build buffers against future shocks. Along the same lines, should high oil
prices be sustained over the medium term, windfalls equivalent to around 2
percent of non-oil GDP per year should be channeled towards critical social
spending, including infrastructure, and domestic arrears payments while
saving the rest.
"Performance under the program has been good. All quantitative performance
criteria for end-February 2022 were met. The structural benchmark for
end-March 2022 related to the new public financial management (PFM)
medium-term strategy and action plan was met. The other structural
benchmark was not met but its most significant elements were implemented on
time. Specifically, the new anti-corruption law was passed in Parliament in
February and ratified in March. The accompanying decree on conflicts of
interest rules and procedures was delayed and is being developed with
support from IMF technical assistance.
"Support from development partners will be crucial for the successful
implementation of the authorities’ economic and structural reform strategy.
“The mission met with the Minister of Finance, Budget and Public Portfolio,
Mr. Rigobert Roger Andely, and other senior government officials. The IMF
mission also met with representatives of civil society, the private sector,
and development partners.
"The IMF team thanks the authorities for their excellent collaboration and
constructive discussions."