Press Release No. 07/55

Press Release No. 07/55

The following statement was issued on March 13 in Kinshasa by an International Monetary Fund (IMF) mission:

"An International Monetary Fund (IMF) African Department mission visited Kinshasa from February 27 to March 13, 2007 at the invitation of the authorities of the Democratic Republic of the Congo (DRC). The mission would like to thank the authorities for their warm welcome and for the quality of its discussions with them.

"The mission notes that the objectives of the government's economic program (Programme relais de consolidation—PRC) covering April-December 2006 have not been met. Budget overruns were recorded in the second half of 2006 and there were significant delays in the implementation of structural reforms.

"Economic performance under the PRC in 2006 can be described briefly as follows:

• Real economic growth slowed to about 5 percent.

• Inflation rose to 18.2 percent on a year-on-year basis, compared with a forecast of 9.5 percent.

• The Congolese franc depreciated by 15 percent.

• International reserves remained at a very low level.

• The basic fiscal balance was 2.5 percentage points of GDP below the projected level, leading to CGF 47.5 billion in bank financing.

"Deterioration in the economic and financial situation remained a concern in the first two months of 2007. Bank financing of fiscal operations, estimated at more than CGF 20 billion, led to a 4 percent increase in consumer prices (25 percent on an annual basis) and a 10 percent depreciation in the Congolese franc over the course of two months.

"The mission underscored the urgency of taking measures to strengthen macroeconomic stability. It reiterated the need to tighten the fiscal stance and to avoid recourse to bank financing. In this context, it discussed with the authorities the draft budget for 2007, which reflects these recommendations. It also encouraged the BCC to continue its efforts to bring down inflation.

"The mission recommended that key structural reforms be completed, including the implementation of the simplified temporary payroll procedure in the civil service, the audit of expenditure financed by debt relief under the Enhanced Heavily Indebted Poor Countries Initiative, and the organizational audit of the BCC.

"The mission also encouraged the government to implement the governance contract approved by the National Assembly, particularly by publishing and analyzing the partnership agreements that have been signed in the mining sector.

"Following the organization of free and democratic elections that have given the population new hopes for peace, security and prosperity, the mission noted the firm commitment of the new government to address the many challenges that it is already facing.

"The mission reaffirmed the IMF's commitment to work with the new government in its economic recovery and poverty reduction efforts. Progress toward the restoration of macroeconomic stability will facilitate discussions on a medium-term program that could be supported by the IMF in the context of a new arrangement under the Poverty Reduction and Growth Facility."