Press Release No. 08/222

Press Release: Statement by an IMF Staff Mission to the Democratic Republic of the Congo

September 25, 2008

A mission from the International Monetary Fund (IMF), headed by Mr. Brian Ames, visited Kinshasa from September 10-23, 2008 to assess the implementation to date of the government's economic program for 2008 and to discuss policies going forward.

The mission met with the Minister of State in charge of the Interior Denis Kalume, Minister of Finance Athanase Matenda, Minister of Budget Adolphe Muzito, Minister of Infrastructure, Public Works, and Reconstruction Pierre Lumbi, Minister of Mines Martin Kabwelulu, Central Bank Governor Jean-Claude Masangu, and other senior government officials. It also met with the President of the Senate Léon Kengo, the President of the National Assembly Vital Kamerhe, and members of the Economic and Financial Commissions of both chambers.

The mission issued the following statement on September 23 in Kinshasa:

"Implementation of the Government's 2008 Economic Program through end-August was broadly satisfactory. Strong revenue performance facilitated a reduction in government borrowing from banks. This, along with prudent monetary policy, helped contain inflation at 24 percent (year-on-year) at end-August in the face of sharply higher world fuel and food prices. Real GDP growth is expected to reach 10.7 percent supported by buoyant mining, construction, and telecommunication activities. International reserves are higher than targeted and the exchange rate remains stable.

"Going forward, strong budgetary discipline along with a tightening of monetary policy will be crucial to anchor macroeconomic stability. The authorities' fiscal targets for 2008 are achievable, but will require resisting pressures for spending increases while making offsetting reductions for any unforeseen expenditures. In this regard, revised urgent spending procedures should help limit such spending to well-defined areas and increase the transparency of public financial management. The Central Bank of the Congo will need to remain vigilant and mop up excess liquidity through the sale of central bank treasury bills (BTRs) with a view to containing inflationary pressures and keeping interest rates positive in real terms.

"The mission reviewed the draft 2009 budget. It encouraged the authorities to base their budget on realistic revenue assumptions. It also noted that a large increase in the wage bill, particularly when coinciding with higher transfers to the provinces, could unduly restrain resources for priority spending and pose risks to macroeconomic stability. The mission recommended that fiscal decentralization be implemented gradually in line with progress in building up institutional capacity at the provincial level.

"The mission supports the government's twin objectives of accelerating infrastructure development and achieving substantial debt relief from its traditional creditors. In this regard, it worked with the authorities on assessing debt sustainability and macroeconomic implications of the Sino-Congolese cooperation agreement. However, further clarifications will need to await the outcome of the related mining feasibility study expected to be completed by March 2009. The mission urged the authorities to take all actions to ensure that the final agreement is consistent with debt sustainability.

"Discussions will continue in Washington during the Annual Meetings of the World Bank and the IMF in mid-October. Continued satisfactory implementation of the government's economic program, observance of proper budget procedures, promulgation of a 2009 budget consistent with macroeconomic stability, and finalization of the Sino-Congolese cooperation agreement consistent with debt sustainability will be key to concluding discussions on a new arrangement under the IMF's Poverty Reduction and Growth Facility and to reaching the completion point of the Heavily Indebted Poor Countries Initiative.

"The mission would like to thank the authorities for their warm hospitality and excellent cooperation during the visit."