## IMF Executive Board Concludes 2021 Article IV Consultation with the Republic of Congo

_IMF News, September 28, 2021_

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## Bibliographic details
- Published: September 28, 2021

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### Economic outlook and key indicators
- Overall growth projected to be around zero percent in 2021.
- Positive non-oil economic growth expected in 2021, buoyed by:
  - easing of lockdowns,
  - gradual vaccine rollout,
  - social spending,
  - domestic arrears repayments,
  - some expansion of agricultural and mining activities.
- Oil sector developments:
  - Contraction of oil production has slowed as oil field access and investment normalize.
  - Value of oil revenues and exports are rising on the back of higher oil prices.
- Price and external balances:
  - Subdued inflation: 2 percent (2021, as stated in the text).
  - Current account surplus: 12 percent of GDP (2021, as stated in the text).

### Fiscal position and debt
- Fiscal stance:
  - Fiscal policy balances the fight against the pandemic, support for recovery, and prudent debt management.
  - The non-oil primary deficit is expected to widen to 17 percent of non-oil GDP in 2021, driven by spending on social assistance, health care, education, and infrastructure.
  - Grants from development partners are lower than last year.
  - Non-oil revenues are improving.
  - Reductions in transfers and subsidies to state-owned enterprises and cuts in goods and services spending are helping create fiscal space.
  - The non-oil deficit is mainly financed by improved oil revenues.
- Debt and arrears:
  - Debt sustainability has been restored though significant debt vulnerabilities remain.
  - Overall debt anticipated at 84 percent of GDP by end-2021.
  - Substantial repayments of domestic arrears and external debt have been facilitated by restructuring of external commercial loans, improved debt management, fiscal discipline, and oil revenue windfalls.
  - Immediate liquidity needs supported by the G20 Debt Service Suspension Initiative (DSSI).
  - Liquidity risks and vulnerabilities to negative oil price shocks are elevated.
  - Pending clearance of external arrears and conclusion of remaining restructuring negotiations, debt is classified as being in “distress”.

### Executive Board assessment and policy recommendations
- General assessment:
  - Directors agreed the Republic of Congo has been hit hard by the COVID-19 pandemic and oil price shocks.
  - The recovery is expected to take hold in 2022, while considerable uncertainty surrounds the outlook.
  - Achieving the growth needed to exit fragility and sustain progress in poverty reduction will require strong efforts to address structural impediments, build climate resilience, and diversify the economy.
  - Strengthened governance and transparency is critical to secure financing from the Fund and development partners.
  - Directors welcomed the authorities’ intention to engage in discussions with the Fund on a possible Extended Credit Facility arrangement.
- Fiscal and debt-related recommendations:
  - Continue near-term fiscal support for the recovery through increased spending on health and social assistance, and payment of domestic arrears.
  - Pursue medium-term fiscal consolidation, enhanced debt management and transparency, and non-oil revenue mobilization.
  - Recommend a comprehensive review of the fiscal regime of the oil sector.
  - Reduce transfers to state-owned enterprises (SOEs).
  - Improve public investment efficiency.
  - Support authorities’ plan to use the newly allocated SDRs for critical social programs given financing constraints.
- Financial sector and governance:
  - Welcome efforts to reduce financial sector vulnerabilities, including domestic arrears clearance.
  - Continued close monitoring of the banking sector due to still high non-performing loans.
  - Urge further efforts to improve governance and transparency.
  - Welcome progress toward adopting a new anti-corruption law and encourage implementation of anti-corruption architecture.
  - Support measures to improve SOE governance and enhance public financial management more broadly.
- Structural reforms:
  - Emphasize advancing structural reforms to support economic diversification and adaptation to climate change.
  - Encourage improving the business environment, facilitating private sector investment, and fostering competitiveness.

### Risks, uncertainties, and medium-term challenges
- Key risks and uncertainties:
  - New waves of the pandemic.
  - Volatile oil revenue prospects.
  - Climate change shocks.
  - Successful implementation of reforms.
- Medium- and long-term challenges:
  - Exiting fragility while adapting to climate change and reduced oil revenues in response to the global transition to low-carbon economies.
  - Non-oil economic growth is expected to gradually recover driven by economic diversification and resilience-building, benefiting from continued governance and business environment reforms, increased social and infrastructure spending, and prudent debt management.
- Upside possibilities:
  - Investment in mining and oil and gas could rise with new field discoveries.
  - Accelerated reform implementation could catalyze more concessional financing.

*Source: Press Release No. 21/277, IMF, September 28, 2021.*

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## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)
- [Republic of Congo and the IMF](http://www.imf.org/external/country/COG/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [G20 Debt Service Suspension Initiative](https://www.imf.org/en/About/FAQ/sovereign-debt)
- [http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2021/09/28/pr21277-congo-imf-executive-board-concludes-2021-article-iv-consultation-with-the-republic-of-congo_