- The IMF team reached staff-level agreement on the fourth review of the authorities' economic reform program supported by the Extended Credit Facility (ECF) arrangement.
- The economy is showing resilience, with real GDP growth at 8.9 percent in 2022 and projected to 6.8 percent in 2023. Macroeconomic imbalances have emerged, fueling inflationary pressures. The conflict in the East and upcoming elections complicate macroeconomic management.
- The authorities will implement tighter macroeconomic policies, while continuing structural reforms to strengthen policy frameworks, governance, and the fight against corruption.
Washington, DC: An International Monetary Fund (IMF) team, led by Mercedes Vera Martin, conducted meetings with the authorities in Kinshasa during April 19–May 3, on the fourth review of the three-year arrangement under the Extended Credit Facility (ECF). At the end of the mission, Ms. Vera Martin issued the following statement:
"The authorities of the Democratic Republic of Congo and the IMF team reached a staff-level agreement on the economic and financial policies needed for the conclusion of the Fourth Review under the ECF arrangement, subject to IMF management approval. Consideration by the IMF's Executive Board is expected by end-June 2023. Completion of the review will make SDR152.3 million available for balance-of-payment support.
"While the economy is showing resilience, macroeconomic imbalances have emerged. Real GDP growth is estimated at 8.9 percent in 2022, due to stronger-than-expected mining production, and is projected to 6.8 percent in 2023, again supported by the extractive sector. Higher-than-envisaged tax revenues in 2022, including windfall revenues from the extractive sector, allowed for higher current expenditures, mainly exceptional security-related expenditures and arrears repayment. The 2022 domestic budget deficit widened to 1.3 percent of GDP and rapid spending at end-2022 generated excess liquidity and contributed to inflationary and exchange rate pressures. As of April 22, 2023, the parallel Congolese franc exchange rate depreciated by 13 percent year-on-year vis-à-vis the U.S. dollar and inflation accelerated to 17 percent. Robust import growth weakened the external position in 2022, with a current account deficit estimated at 5.7 percent of GDP. Strong financial inflows allowed the Central Bank of Congo (BCC) to accumulate international reserves, which on a gross basis was equivalent to about 2 months of imports at end-2022.
"The medium-term outlook remains favorable, supported by expanding mining production and hinges on proactive reform efforts. In a context of elevated uncertainty related to the ongoing armed conflict in the East, upcoming elections and external downside risks arising from the weakened global economic outlook, commodity prices volatility and the prolonged war in Ukraine, prudent economic policies are warranted for the rest of 2023.
"Fiscal policy is expected to prudently address additional security, humanitarian and election spending needs related to the deteriorated situation in the East, while revenues in 2023 are projected at the level of the third review. Unanticipated revenues, if any, will help build fiscal buffers. Prioritizing spending, revising goods and services spending downward and keeping the wage bill in line with the budget, will help sustain capital investment spending while reducing inflationary pressures.
"Revenue mobilization and public financial management reforms will strengthen fiscal policy. Efforts to improve tax administration and streamline parafiscal charges are important to facilitate revenue mobilization. Continuing to operationalize the General Directorate of the Treasury and Public Accounting and strengthening spending control procedures and cash management would contribute to rationalizing expenditures and improving transparency. More broadly, establishing the single treasury account, strengthening the public procurement system, and enhancing public investment management and budget execution reporting will help improve budget execution, enhance fiscal governance, and improve spending efficiency.
"The BCC is expected to tighten monetary policy to contain inflationary pressures, while continuing to build reserves for external resilience. Strengthened communication would help anchor inflation expectations. Maintaining the role of the exchange rate as a shock absorber remains key to safeguarding reserves. Reforms to strengthen the monetary policy framework and central bank governance will be critical to improve liquidity management and the efficiency of monetary policy transmission. Ambitious reforms are also needed to bolster banking sector resilience and to promote financial inclusion, starting with the implementation of the new commercial banking law that was approved in December 2022.
"Improving the business climate remains key for economic diversification and private sector-led growth and relies on continued efforts towards implementing the anti-corruption framework, rationalizing the tax system, enhancing the transparency in the mining sector, and publishing beneficial ownership information for awarded government contracts. Major reforms are needed to operationalize the law on Anti-Money Laundering and Combating the Financing of Terrorism that was adopted in December 2022, and to exit the Financial Action Task Force's grey list.
"The mission also held discussions on climate-related reform plans to support the authorities' request to access the IMF's Resilience and Stability Facility. The reform measures are intended to build resilience against climate-related risks and meet the country's nationally determined contribution (NDC), favor green and resilient investments, strengthen governance in the forestry sector, and implement fuel subsidy reform. These reforms also benefited from consultations with the World Bank, the African Development Bank, the Central African Forest Initiative and other partners. Building on these constructive discussions, IMF staff and the authorities will advance work on the facility in the coming weeks.
"The mission met with Prime Minister Jean-Michel Sama Lukonde Kyenge, Vice-Prime Minister and Minister of Economy Vital Kamerhe, Vice-Prime Minister and Minister for Public Service Vice-Prime Minister and Minister of Defense Jean-Pierre Bemba, Vice-Prime Minister and Minister for Public Service Jean-Pierre Lihau, Minister of the State and of the Budget Aimé Boji, Minister of Finance Nicolas Kazadi, Minister of Mining Antoinette N'Samba Kalambayi, BCC Governor Malangu Kabedi Mbuyi, other senior officials, development partners, and representatives of the private sector and civil society organizations.
"The IMF team thanks the Congolese authorities, private sector stakeholders and the donor community for their strong cooperation and candid discussions."
