IMF Team and Democratic Republic of the Congo Reach Staff-Level Agreement on Fifth Review of Extended Credit Facility

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An International Monetary Fund (IMF) delegation, led by Calixte Ahokpossi, engaged in discussions with authorities from October 18 to October 31, 2023, to assess progress on reforms and the country’s policies under the Democratic Republic of the Congo’s three-year arrangement within the Extended Credit Facility (ECF). This arrangement, sanctioned by the IMF Executive Board on July 15, 2021, amounts to SDR1,066 million (approximately US$1.52 billion).

Following the conclusion of the mission, Mr. Ahokpossi issued a statement outlining the outcomes:

“After a preliminary evaluation of program performance and consensus on future policies, the authorities of the Democratic Republic of Congo and the IMF delegation have reached a staff-level agreement on economic policies to finalize the fifth review under the ECF arrangement. Pending approval from IMF management and consideration by the IMF’s Executive Board, anticipated by mid-December 2023, the completion of the review will enable the release of SDR152.3 million to bolster international reserves.

“Despite confronting a challenging and uncertain environment, the economy exhibits resilience. Fueled by a dynamic extractive sector, growth is forecasted to surpass 6 percent in 2023, notwithstanding declining cobalt prices and insecurity in the East. The depreciation of the Congolese franc contributed to inflation, which peaked at 23.3 percent year-on-year in July 2023, before slightly moderating to below 22 percent by October 2023. To mitigate inflationary pressures, the Central Bank of the Congo (BCC) raised its policy rate by 1400 basis points in August, bringing it to 25 percent.

“The government’s domestic revenue fell short of program projections in the initial three quarters of 2023. Consequently, spending adjustments have been made to prioritize security, election expenditures, and other current outlays over the settlement of arrears.

“Gross international reserves saw a moderate increase to about $5.0 billion by end-October 2023, amidst various external challenges. The persisting high current account deficit, lower-than-expected dollar-denominated mining tax revenues, and substantial BCC interventions amidst exchange rate depreciation pressures contributed to this external position.

“In a milieu of heightened uncertainties, it is imperative that economic policies remain prudent, while reforms persevere.

“Fiscally, it is crucial to restrain non-essential expenditures, rationalize spending on goods and services, and maintain social and priority public investment spending. The recent decision by the authorities to increase pump prices and settle a portion of fuel subsidy arrears has been welcomed. Fiscal policies necessitate ongoing reform efforts to enhance the budget process, strengthen fiscal governance, and enhance spending efficiency. These efforts encompass operationalizing the General Directorate of the Treasury and Public Accounting, advancing towards the single Treasury account, and enhancing spending oversight under emergency procedures.

“On the monetary front, the BCC is expected to enhance monetary policy implementation to contain inflationary pressures. Exchange rate flexibility remains pivotal in absorbing external shocks and preserving reserves. Foreign exchange market interventions should be restricted to mitigating episodes of extreme exchange rate volatility. The IMF will continue supporting ambitious reforms to fortify financial stability and enhance access to banking services.

“The authorities must intensify endeavors to enhance transparency and governance, including ensuring the timely publication of mining contracts and reinforcing control institutions like the Cour des Comptes or the General Inspectorate of Finance. Decisive progress is imperative for the effective implementation of the law on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) and the execution of the action plan to exit the Financial Action Task Force’s grey list.

“The mission engaged with various officials including President Chief of Staff Guylain Nyembo Mbwizya, Vice-Prime Minister and Minister of Economy Vital Kamerhe, Vice-Prime Minister and Minister for Public Service Jean-Pierre Lihau, Minister of Finance Nicolas Kazadi, Minister of Employment, Labor, and Social welfare Claudine Ndusi, Deputy Budget Minister Elysée Bokumuamua Maposo, Deputy Finance Minister O’Neige N’Sele Mimpa, BCC Governor Malangu Kabedi Mbuyi, other senior officials, development partners, and representatives of the private sector and civil society organizations. The IMF team expresses gratitude to the Congolese authorities for their cooperation and open discussions.”