IMF Staff Reaches Staff-Level Agreement on the First Review of the Extended Credit Facility Arrangement with the Republic of Congo

IMF News, April 20, 2022

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Canonical URL: IMF Staff Reaches Staff-Level Agreement on the First Review of the Extended Credit Facility Arrangement with the Republic of Congo

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.
The team reached a staff-level agreement with the authorities on the completion of the first review under the Extended Credit Facility (ECF), subject to the approval of the IMF Executive Board.
End-of-mission statement issued April 20, 2022.

Real GDP growth is expected to strengthen to 4.3 percent in 2022, driven by:
- improved oil production;
- momentum from agriculture and mining;
- continued vaccine rollout;
- domestic arrears payments contributing to reduced non-performing loans and financial sector stability.
Inflation is projected at 3.5 percent in 2022, reflecting rising global food and oil prices 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.
Pending clearance of external arrears, debt is classified as being in “distress”.
Debt vulnerabilities remain large, especially amid high oil price volatility.
Priority reforms to avoid renewed arrears and strengthen governance:
- progress in procurement and management of debt and public finances, including public investment;
- implementation of the new anti-corruption architecture;
- debt management reforms to cement gains in governance and transparency.

Fiscal policy must balance supporting a recovery while safeguarding debt sustainability.
Key fiscal measures recommended:
- revenue mobilization;
- rationalization of inefficient subsidies to state-owned enterprises;
- stepped up collection of tax arrears;
- significant removal of tax and customs exemptions;
- concrete measures to raise oil-related fiscal revenues;
- complement on-going tax administration reforms with stronger enforcement.
Expenditure prioritization to support higher, more inclusive, and resilient growth:
- raise spending on social assistance, health care, education, and infrastructure.
2022 budget deficit target: 15.3 percent of non-oil GDP.
Use of oil revenue windfalls:
- after financing debt service, part of windfalls should finance tax deferrals initiated during the pandemic and stepped up social assistance to help businesses and low- and middle-income households cope with high inflation;
- acceleration of measures to facilitate access to credit for small businesses;
- in 2022, any remaining oil revenue windfalls should be used to build buffers against future shocks;
- 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.
Structural benchmarks:
- 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.
- 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.

The mission met with the Minister of Finance, Budget and Public Portfolio, Mr. Rigobert Roger Andely, and other senior government officials.
The mission also met with representatives of civil society, the private sector, and development partners.
The IMF team thanked the authorities for their excellent collaboration and constructive discussions.

IMF Communications Department — Press Release No. 22/123, April 20, 2022.