Press Release No. 09/217

Press Release: IMF Executive Board Completes First Review Under PRGF Arrangement for the Republic of Congo and Approves US$1.86 Million Disbursement

June 17, 2009

The Executive Board of the International Monetary Fund (IMF) completed today the first review of the Republic of Congo's economic performance under a three-year arrangement under the Poverty Reduction and Growth Facility (PRGF). The completion of the review enables the disbursement of SDR 1.21 million (about $1.86 million), which would bring total disbursements under the arrangement to SDR 2.42 million (about US$3.72 million).

The Executive Board, in completing the review, granted waivers for the nonobservance of one quantitative performance criteria related to the ceiling on new non-concessional external public debt and three structural performance criteria. The Executive Board also approved the modification of the quantitative performance criterion on the non-oil primary fiscal balance and the continuous performance criterion related to non-concessional external debt.

The three-year PRGF arrangement for the Republic of Congo was originally approved by the Executive Board on December 8, 2008 (see Press Release No. 08/311) in an amount equivalent to SDR 8.46 million (about US$ 13.01 million).

Following the Board's discussion on the Republic of Congo, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, made the following statement:

“The slowdown in external demand, collapse in world oil prices, and worsening terms of trade have led to a deterioration in Congo’s economic outlook. While higher oil production could help support growth this year, the expansion in the non-oil sector is likely to be well below the pace of 2008. The satisfactory implementation of the PRGF arrangement has put the Congolese authorities in a good position to address the challenges posed by the difficult global environment.

“The significant decline in the non-oil primary fiscal deficit in 2008 and the planned steps to consolidate the fiscal stance further this year provide some room for fiscal easing should the economic outlook deteriorate further. Over the long run, continued fiscal discipline will be critical to the sustainability of the fiscal position, and the authorities need to resist spending pressures.

“ The recent progress in improving the management of Congo’s financial and natural resources is encouraging. The authorities remain committed to strengthening public financial management and further enhancing governance and transparency in the oil sector.

“ The authorities’ intention to pursue tax reform and accelerate efforts to improve financial intermediation through stepped up implementation of the financial sector strategy is timely. Tax reform would help to mobilize domestic revenue, which is important in the current environment of volatile world oil prices. Further development of the financial sector could support economic activity.

“ Congo’s external position has been strengthened through the recent rescheduling of its external debt with Paris Club creditors, and the settlement with litigating creditors on favorable terms. However, Congo continues to remain in debt distress. It is therefore important that the authorities seek foreign financing only on highly concessional terms and maintain their efforts to strengthen debt management.

“Debt relief under the Enhanced Heavily Indebted Poor Countries Initiative would further improve Congo’s external debt position. The authorities have made significant progress toward implementing the floating completion point triggers, and remain committed to completing the remaining steps”, added Mr. Portugal.