IMF Executive Board Concludes the 2024 Article IV Consultation and Completes the Sixth Review under the Extended Credit Facility Arrangement for the Democratic Republic of the Congo
IMF News, July 3, 2024
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- IMF Executive Board Concludes the 2024 Article IV Consultation and Completes the Sixth Review under the Extended Credit Facility Arrangement for the Democratic Republic of the Congo
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- Published: July 3, 2024
Overview
- The DRC’s macroeconomic environment remains challenging, including from the security and humanitarian crisis in the East of the country.
- Authorities have maintained prudent macroeconomic policies.
- The Executive Board concluded the Article IV consultation and completed the sixth and last review of the Extended Credit Facility (ECF) Arrangement.
- Completion of the sixth review allowed an immediate disbursement equivalent to 152.2 million SDR (about US$ 224.7 million).
- Aggregate disbursement to date under the ECF Arrangement is 1,066 million SDR (about US$ 1,573.8 million).
Program Performance and Reform Implementation
- Performance under the program has been generally positive, with most quantitative targets met and key reforms implemented, albeit at a slow pace.
- For the sixth and last review, all quantitative performance criteria were met except:
- The performance criterion on the domestic fiscal balance was missed due to higher-than-expected exceptional spending mostly on security and the 2023 general elections.
- Corrective actions are being implemented to address the missed performance criterion.
- Public financial management reforms have been slower than anticipated; further efforts are needed to:
- Rationalize the earmarking of revenue for special accounts in the budget.
- Enforce the expenditure chain and cash management procedures.
- Continued refraining from monetary financing—a key anchor for the program—has been a significant achievement.
- Foreign exchange reserves build-up has been much higher than expected.
- More needs to be done to strengthen the monetary and exchange rate policy frameworks.
Macroeconomic Developments (recent)
- Real GDP growth is estimated at 8.4 percent for 2023, supported by robust growth of the extractive sector.
- Inflation:
- Peaked at 23.8 percent at the end of 2023.
- Eased gradually to 21.2 percent at end-May 2024.
- Fiscal:
- 2023 domestic fiscal deficit reached 1.3 percent of GDP, exceeding projections due to higher spending for elections and security, despite good revenue performance in Q4 2023.
- International reserves:
- Reached nearly US$5.5 billion or about two months of imports at end-2023.
Outlook and Projections
- Economic growth projections:
- 2024: 4.7 percent.
- Average 2024-28: 4.8 percent.
- Supported by continued expansion of major mines and gradual acceleration of non-extractive sector growth.
- Inflation projections:
- Projected to remain elevated at 17.2 percent on average in 2024.
- Reach 12 percent at end-December 2024.
- Gradually revert to the Banque Centrale du Congo’s target of 7 percent over the medium term.
- Fiscal outlook:
- Fiscal pressures expected to persist.
- Good revenue performance and efforts to contain non-priority spending expected to help narrow the domestic fiscal deficit below 1 percent of GDP in 2024 and over the medium term.
Main Risks to the Outlook
- Escalation of armed conflicts in the East.
- Further inflationary pressures stemming from oil and food price volatility, with negative effects on real disposable income of households.
- An abrupt growth slowdown in China.
- Intensification of regional conflicts, including Russia’s war in Ukraine and the conflict in the Middle East, which could weigh on export revenues and foreign direct investment.
Policy Recommendations and Priority Reforms
- Fiscal policy:
- Sustain fiscal discipline.
- Gradually move toward a resource-based fiscal framework.
- Targeted public financial management reforms, including enforcement of spending chain controls, to curb procyclicality of spending, create space for investment and social spending, build resilience to shocks, and strengthen fiscal credibility.
- Monetary and external sector policies:
- BCC commitment to further tighten monetary policy if necessary.
- Continue reforms to strengthen the monetary policy implementation framework and FX intervention strategy to enhance transmission of monetary policy and alleviate pressures in the FX market.
- Continue efforts to accumulate reserves while safeguarding the role of the exchange rate as a shock absorber to build external resilience.
- Governance and structural reforms:
- Advance reforms to improve governance and transparency, including in mining.
- Strengthen the anti-corruption and AML/CFT frameworks.
- Enhance the business climate to support private sector development and promote diversified, sustainable, and inclusive growth.
Selected Economic and Financial Indicators, 2023-26 (from Table 1)
- Real GDP:
- 2023 Est.: 8.4
- 2024 Proj.: 4.8
- 2025 Proj.: 4.7
- 2026 Proj.: 5.6
- Extractive GDP:
- 2023 Est.: 18.2
- 2024 Proj.: 4.4
- 2025 Proj.: 5.8
- 2026 Proj.: 6.4
- Non-extractive GDP:
- 2023 Est.: 3.5
- 2024 Proj.: 5.0
- 2025 Proj.: 4.1
- 2026 Proj.: 5.3
- GDP deflator:
- 2023 Est.: 14.4
- 2024 Proj.: 13.0
- 2025 Proj.: 16.2
- 2026 Proj.: 8.1
- Consumer prices, period average:
- 2023 Est.: 19.9
- 2024 Proj.: 14.7
- 2025 Proj.: 17.2
- 2026 Proj.: 8.5
- Consumer prices, end of period:
- 2023 Est.: 23.8
- 2024 Proj.: 11.6
- 2025 Proj.: 12.0
- Money and credit (annual change in percent of beginning-of-period broad money):
- Net foreign assets:
- 2023 Est.: 20.0
- 2024 Proj.: 10.7
- 2025 Proj.: 22.0
- 2026 Proj.: 13.2
- Net domestic assets:
- 2023 Est.: 20.3
- 2024 Proj.: 10.0
- 2025 Proj.: -0.3
- 2026 Proj.: 2.8
- Domestic credit:
- 2023 Est.: 34.1
- 2024 Proj.: 12.6
- 2025 Proj.: 7.2
- 2026 Proj.: 11.0
- Broad money:
- 2023 Est.: 40.3
- 2024 Proj.: 20.7
- 2025 Proj.: 21.6
- 2026 Proj.: 16.0
- Central government finance (percent of GDP):
- Revenue and grants:
- 2023 Est.: 14.8
- 2024 Proj.: 14.9
- 2025 Proj.: 15.7
- 2026 Proj.: 14.2
- Expenditures:
- 2023 Est.: 16.5
- 2024 Proj.: 16.3
- 2025 Proj.: 17.8
- 2026 Proj.: 15.8
- Domestic fiscal balance:
- 2023 Est.: -1.3
- 2024 Proj.: -0.6
- 2025 Proj.: -0.5
- 2026 Proj.: -0.4
- Investment and saving:
- Gross national saving:
- 2023 Est.: 9.4
- 2024 Proj.: 6.8
- 2025 Proj.: 10.9
- 2026 Proj.: 9.3
- Investment:
- 2023 Est.: 10.8
- 2024 Proj.: 15.6
- 2025 Proj.: 15.3
- 2026 Proj.: 12.4
- Non-government investment:
- 2023 Est.: 6.0
- 2024 Proj.: 8.0
- 2025 Proj.: 7.8
- Balance of payments:
- Exports of goods and services:
- 2023 Est.: 44.3
- 2024 Proj.: 39.6
- 2025 Proj.: 43.9
- 2026 Proj.: 37.2
- Imports of goods and services:
- 2023 Est.: 50.3
- 2024 Proj.: 45.2
- 2025 Proj.: 48.5
- 2026 Proj.: 42.6
- Current account balance, incl. transfer:
- 2023 Est.: -6.2
- 2024 Proj.: -4.1
- 2025 Proj.: -4.6
- 2026 Proj.: -3.2
- Current account balance, excl. transfers:
- 2023 Est.: -7.6
- 2024 Proj.: -5.4
- 2025 Proj.: -5.1
- 2026 Proj.: -4.4
- Gross official reserves (weeks of imports):
- 2023 Est.: 10.4
- 2024 Proj.: 10.2
- External debt — Debt service in percent of government revenue:
- 2023 Est.: 7.7
- 2024 Proj.: 7.4
- 2025 Proj.: 7.3
IMF Communications Department; Press Release No. 24/253, July 3, 2024.
