IMF Executive Board Concludes 2022 Article IV Consultation and the Second Review Under the Extended Credit Facility Arrangement for the Democratic Republic of the Congo
IMF News, June 29, 2022
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- Published: June 29, 2022
Summary of action and financing
- Executive Board concluded the Article IV consultation and the second review of the Extended Credit Facility (ECF) Arrangement for the Democratic Republic of Congo (DRC).
- Completion of the Second Review allowed an immediate disbursement equivalent to 152.3 million SDR (about US$ 203 million), bringing the aggregate disbursement to date to 456.9 million SDR (about US$653 million).
Macroeconomic performance in 2021
- Growth and inflation:
- Real GDP growth: 6.2 percent.
- Consumer Price Index (CPI) inflation (year-on-year): declined to 5.3 percent (end of period).
- Drivers:
- Economy rebounded more than envisaged, supported by non-extractive growth.
- Fiscal outturn better than projected due to higher fiscal revenues and external financing.
- Investment increased, though domestic arrears accumulated.
- External and financial indicators:
- Gross international reserves increased to US$3 billion at end 2021.
- Despite excess liquidity, private sector credit remains subdued at 7 percent of the GDP.
- Banking sector faces vulnerabilities.
- Social conditions:
- Fragility persists: 72.5 percent of the population is in poverty and access to basic public services is severely under-provisioned.
Program performance and structural reform progress
- Overall assessment: Progress under the Fund-supported program remains satisfactory.
- Quantitative and indicative targets:
- End-December 2021 quantitative performance criteria (QPCs) and all but one indicative target (on social spending due to inter-ministerial coordination shortcomings) were observed.
- Structural benchmarks (SBs):
- Four out of five SBs met, pending the publication of one mining contract.
- Progress on two end-June 2022 SBs is slightly delayed; staff proposes resetting to end-September.
- Institutional reforms noted:
- Authorities halted central bank financing to the government.
- Reform momentum under the ECF arrangement was sustained.
2022 outlook, shocks, and fiscal implications
- Growth and inflation projections and revisions:
- Growth revised to 6.1 percent (6.4 percent previously).
- Inflation revised up to 11 percent due to imported prices.
- Fiscal projections:
- Domestic fiscal deficit (program target) projected to widen by 0.4 percentage points of GDP, to 1.4 percent of GDP.
- Higher mining revenues will not fully compensate for increased fiscal costs associated with the fuel subsidy and higher domestically financed investment for priority social infrastructure projects.
- Policy reactions and risks:
- Authorities increased domestic fuel prices, but more efforts needed to reduce untargeted subsidies and budget costs while supporting vulnerable households through targeted social transfers.
- Spillovers from the war in Ukraine may further increase international food prices and slow global activity, worsening external and fiscal balances, inflationary pressures and food insecurity.
- Medium-term view:
- Outlook remains favorable supported by improved mineral prices, but significant downside risks remain and severe fragility persists.
Executive Board and Chair statements — policy priorities
- Chair (Mr. Okamura) emphasized:
- Continued revenue mobilization and contained current spending—including through fuel subsidy and civil service reforms—are key to create space for priority investment.
- Strengthening fiscal institutions and governance, including enhancing budget credibility and cash management, is crucial to improve public financial management and avoid domestic arrears accumulation.
- Improving public investment management will enhance efficiency and transparency.
- Strengthening monetary and exchange rate policy frameworks to support price stability and external sustainability; continue accumulating reserves buffers and enhance the role of the exchange rate as a shock absorber.
- Continue efforts to strengthen the independence, governance, and safeguards of the Central Bank of Congo; reforms to strengthen banking regulatory, supervisory, and resolution frameworks.
- Advance structural reforms and strengthen policy frameworks, including natural wealth management, mining sector transparency, anti-corruption and AML/CFT frameworks, business climate, and governance to support private sector development, economic diversification, and competitiveness.
Executive Board Assessment — emphasis from Directors
- Directors welcomed higher growth and strengthened fiscal and external positions in 2021 and satisfactory ECF performance.
- Directors noted increased downside risks from the worsened external environment, including higher fuel and food prices and volatile commodity prices.
- Key Director recommendations:
- Continue prudent macroeconomic policies and steadfast program implementation.
- Create room for infrastructure and human investment through tax policy and tax administration reforms, contained current spending, and well-managed fiscal risks.
- Strengthen fiscal institutions and governance, enhance budget execution and cash management, and address weaknesses in public investment management.
- Improve debt management while seeking concessional and grant financing.
- Strengthen monetary and exchange rate policy frameworks and adopt a tightening monetary policy bias given increasing inflation.
- Sustain efforts to strengthen central bank independence, governance, and safeguards; enhance banking regulation, supervision, and resolution frameworks.
- Advance structural reforms in resource wealth management, mining sector transparency (including timely publication of contracts), anti-corruption and AML/CFT frameworks, and governance to support private sector development, diversification, and competitiveness.
- Timing:
- Next Article IV consultation expected within 24 months.
Key economic and financial indicators (selected, 2021–24)
- Real GDP:
- 2021 Est.: 6.2
- 2022 CR No. 22/3: 6.4
- 2023 Proj.: 6.1
- 2024 Proj.: 6.9 and 6.7 (table lists two 2024 columns; values shown: 6.9 and 6.7)
- Extractive GDP:
- 2021: 10.1
- 2022: 10.4
- 2023: 10.6
- 2024: 9.9 and 9.0
- Non-Extractive GDP:
- 2021: 4.5
- 2022: 4.1
- 2023: 5.4
- 2024: 5.1 and 5.9
- GDP deflator:
- 2021: 17.6
- 2022: 4.8
- 2023: 8.4
- 2024: 6.0 and 9.7
- Consumer prices, period average:
- 2021: 5.6
- 2022: 9.8
- Consumer prices, end of period:
- 2021: 5.3
- 2022: 5.8
- 2023: 11.0
- 2024: 6.8
- Money and credit (annual change in percent of beginning-of-period broad money):
- Net foreign assets:
- 2021: 41.5
- 2022: 35.3
- 2023: 32.7
- 2024: 27.4 and 20.8 and 20.3 (table lists multiple columns)
- Net domestic assets:
- 2021: -6.4
- 2022: -5.6
- 2023: 4.6
- 2024: -10.4 and 12.0 and 4.7
- Domestic credit:
- 2021: 1.9
- 2022: 9.1
- 2023: 8.0
- Broad money:
- 2021: 35.1
- 2022: 29.7
- 2023: 37.3
- 2024: 17.0 and 32.8 and 25.0
- Central government finance (percent of GDP):
- Revenue and grants:
- 2021: 13.8
- 2022: 12.3
- 2023: 14.0
- 2024: 12.7 and 14.3 and 14.7
- Expenditures:
- 2021: 14.8
- 2022: 14.2
- 2023: 17.5
- 2024: 17.1
- Domestic fiscal balance:
- 2021: -0.1
- 2022: -0.9
- 2023: -1.2
- 2024: -0.4 and -0.8
- Investment and saving:
- Gross national saving:
- 2021: 13.5
- 2022: 15.7
- 2023: 16.2
- Investment:
- 2021: 14.9
- 2022: 15.9
- Non-government:
- 2021: 10.8
- 2022: 10.7
- Balance of payments:
- Exports of goods and services:
- 2021: 39.5
- 2022: 40.8
- 2023: 44.9
- 2024: 41.6 and 45.5 and 45.6
- Imports of goods and services:
- 2021: 39.2
- 2022: 40.7
- 2023: 42.7
- 2024: 41.2 and 42.4
- Current account balance:
- 2021: -0.5
- 2022: 0.0
- 2023: 0.3
- Gross official reserves (weeks of imports):
- 2021: 6.3
- 2022: 7.8
- 2023: 8.3
- 2024: 8.5 and 9.5 and 10.3
- External debt:
- 2021: 18.3
- 2022: 18.9
- Debt service in percent of government revenue:
- 2021: 7.2
- 2022: 8.6
- 2023: 7.6
- 2024: 7.5
Press Release No. 22/240 — June 29, 2022; IMF Communications Department