IMF Executive Board Completes Third Review Under the ECF Arrangement with the Republic of Congo and Approves US$1.78 Million DisbursementPress Release No. 10/325
August 31, 2010
The Executive Board of the International Monetary Fund (IMF) today completed the third review of the Republic of Congo’s economic performance under a three-year arrangement under the Extended Credit Facility (ECF). The completion of the review enables the disbursement of SDR 1.21 million (about US$1.83 million), which would bring total disbursements under the arrangement to SDR 3.63 million (about US$5.48 million). The Executive Board’s decision was taken on a lapse-of-time basis, which allows the Board to complete reviews without convening formal discussions.
The three-year ECF arrangement for the Republic of Congo was originally approved on December 8, 2008 (see Press Release No. 08/311) in an amount equivalent to SDR 8.46 million (about US$12.8 million).
In completing the third review under the three-year ECF arrangement, the Executive Board endorsed the staff’s appraisal, as follows:
The near-term outlook for the Congolese economy is favorable. Strong policies, improving external conditions, and debt relief obtained under the Heavily Indebted Poor Country (HIPC) completion point (January 2010) will support macroeconomic stability. Fiscal consolidation in excess of program targets and progress on key structural reforms have strengthened policy implementation and resilience to shocks.
These continuing efforts, together with investment in basic infrastructure, augur well for a take-off of non-oil growth and lasting poverty reduction. Promptly directing resources freed by HIPC debt relief toward pro-growth and pro-poor spending may help mitigate public pressures for increasing public expenditure, while helping to advance development objectives.
Structural reforms have moved ahead, particularly in the area of public financial management (PFM) and the management of oil resources. The broader reform process was not impacted by the non-observance of two structural benchmarks due to technical issues, and the authorities are taking actions in these areas.
In the period ahead, efforts should continue in key areas, such as tax reform, improving expenditure efficiency and strengthening oil wealth management. Simultaneously supporting the objectives of the authorities’ Poverty Reduction Strategy and fiscal sustainability, while maintaining a prudent external debt policy, necessitates redoubled efforts to increase non-oil revenue collection to expand the resource envelope for improving public service delivery and raising priority spending. Scope for increasing non-oil tax collection is potentially large, and staff supports the authorities’ request for technical assistance in the area of tax policy.
• The authorities’ planned implementation of their tax action plan is welcome, but should be accompanied by continued efforts to improve tax and customs administration.
• As fiscal space widens some additional spending may be justified. However, it will be critical to bolster gains in expenditure efficiency, including through a well-designed civil service reform and further strengthening of oil wealth management, while continuing efforts toward achieving fiscal sustainability.
Reaching the completion point has significantly reduced Congo’s debt burden. Staff welcomes the authorities’ good faith efforts to obtain comparable treatment from all remaining commercial creditors and their best efforts to conclude bilateral agreements as soon as possible. Staff also welcomes the authorities’ intention to continue closely monitoring of public finances, including through an indicative target on net domestic financing. New foreign borrowing should only be considered if extended on concessional terms.