IMF Executive Board Concludes 2022 Third Review Under the Extended Credit Facility Arrangement with The Democratic Republic of the Congo
IMF News, December 20, 2022
Source details
- Canonical URL
- IMF Executive Board Concludes 2022 Third Review Under the Extended Credit Facility Arrangement with The Democratic Republic of the Congo
Other formats
Bibliographic details
- Published: December 20, 2022
Disbursement and program status
- The Executive Board decision allows for an immediate disbursement of about US$203 million to the Democratic Republic of the Congo.
- Completion of the Third Review allowed an immediate disbursement equivalent to SDR152.3 million (about US$ 203 million), bringing the aggregate disbursement to date to SDR609.2 million (about US$812.4 million).
- The disbursement is intended to support balance-of-payment needs and reinforce international reserves given downside risks to the domestic and global economic outlook.
- Progress under the program remains satisfactory: all end-June 2022 quantitative performance criteria were met; all indicative targets (ITs) except for two were met.
Macroeconomic performance and outlook
- Growth is forecast at 6.6 percent in 2022, supported by higher-than-envisaged mining production.
- Inflation is expected to exceed 12 percent by end-2022, driven by higher global food and fuel prices exacerbated by the war in Ukraine and supply chain bottlenecks.
- The current account reached a surplus in the first half of the year, driven by strong exports.
- As of end-October, gross international reserves have reached about 2 months of imports, well-above the objective at the beginning of the ECF arrangement.
- The 2022 domestic fiscal balance (cash basis) is projected at 1.1 percent of GDP, in line with program commitments despite unanticipated spending pressures from the escalating conflict in the East, increased outlays in ministries and public institutions, and arrears repayment to fuel distributors; these were funded by higher unexpected fiscal revenues mainly due to favorable mining developments.
- Program implementation specifics:
- Two ITs not met: one related to health spending due to procurement delays; one related to the central bank’s guarantees for central government domestic loans due to monitoring shortcomings (no new guarantees were issued).
- Efforts to meet social spending under the IT will require close monitoring during implementation.
- Structural benchmarks: four of six were met, and a fifth was achieved with a small delay.
Key risks and vulnerabilities
- Downside risks to the 2023 outlook include adverse terms-of-trade shocks and the conflict in the east.
- Inflationary pressures from global energy and food price increases and supply chain bottlenecks.
- Fiscal pressures from conflict-related spending and arrears payments could strain budget credibility without sustained revenue mobilization and spending containment.
Policy recommendations and priorities (from Executive Board discussion / Mr. Okamura)
- Fiscal policy:
- Narrow the fiscal deficit in 2023 through sustained revenue mobilization and contained current spending in goods, services and subsidies.
- Use fiscal space for social spending, infrastructure, human capital investment, and arrears clearance.
- Save revenue overperformance to build buffers.
- Phase out the fuel subsidy and establish targeted social transfers to strengthen social safety nets and protect the vulnerable.
- Enhance budget credibility so the budget can serve as a fiscal anchor under the program.
- Revamp the fiscal framework to manage resource wealth, strengthen the public investment framework, and accelerate public financial management reforms to enhance spending efficiency and transparency.
- Monetary and external policy:
- Be ready to tighten the monetary stance to bring inflation to the 7- percent target together with efforts to strengthen the monetary policy framework to support price stability.
- Further accumulation of reserves is essential while enhancing the role of the exchange rate as a shock absorber to support external resilience.
- Financial sector and governance:
- The recent adoption of the new banking law is crucial to strengthen financial sector regulation and supervision.
- Sustain efforts to improve governance, including in mining; strengthen anti-corruption and AML/CFT frameworks; and enhance the business environment to support private sector development and competitiveness.
- Commit to specific climate-related reforms to catalyze financing for green investments.
Press Release No. 22/452. December 20, 2022. IMF Communications Department.