Press Release No. 15/248

Press Release: IMF Staff Completes 2015 Article IV Mission to the Republic of Congo

June 1, 2015

An International Monetary Fund (IMF) team led by Dalia Hakura, Mission Chief for the Republic of Congo, visited Brazzaville during May 19-June 1, 2015 to conduct discussions for the 2015 Article IV review of the Congolese economy. Discussions focused on addressing macroeconomic policy challenges associated with the recent decline in oil prices and the medium-term reform agenda aimed at achieving the authorities’ strategic objectives of macroeconomic stability, sustained inclusive growth, and reducing poverty and inequality.

At the end of the mission, Ms. Hakura made the following statement:

“The Republic of Congo’s economy has continued to grow strongly in 2014. Real Gross Domestic Product (GDP) grew by 6.8 percent in 2014, supported by a rebound in oil production and the robust performance of the non-oil economy. Inflation fell from 2.1 percent at end-2013 to 0.5 percent at end-2014, owing to lower global food prices. The Republic of Congo’s international reserves and government deposits at the regional central bank, at 9.5 months of prospective imports and 20 percent of GDP, respectively, are the highest in the Central African Economic and Monetary Community (CEMAC). Public debt now amounts to 36 percent of GDP, up from 32 percent of GDP in 2013 and 20 percent of GDP in 2010, immediately after the HIPC Completion Point.

“The Republic of Congo has been hit hard by the oil price shock. The sharp increase in government spending in recent years, mainly financed from oil revenues, has supported growth over the past years. But it also heightened the country’s vulnerability to the negative oil price shock. Fiscal and current account balances deteriorated in 2014 reflecting the steep decline in oil prices in the second half of 2014.

“The authorities recognize the implications of the adverse oil price shock. Faced with lower oil receipts, they have taken measures to maintain macroeconomic stability. The repatriation of overseas deposits helped to finance the fiscal deficit in 2014 and to bolster international reserves. The Council of Ministers has adopted a supplementary 2015 budget that reflects the new reality of the lower oil price and substantially lower fiscal revenues. The mission urges early approval by parliament of the supplementary budget and the preparation of contingency plans, given the fluid global situation, to manage downside risks.

“The near- and medium term outlook will be shaped by developments in the oil sector and the path and quality of fiscal adjustment. Overall growth is projected to average about 3 percent per annum during 2015–20, as oil production is projected to peak in 2018 following the coming on stream of a new oil field. Non-oil growth is projected to slow to around 3 percent in 2015–16, as public investment spending contracts and mining projects are delayed due to the uncertain global outlook for iron ore.

”Over the medium-term, it will be important to develop a comprehensive and coherent fiscal adjustment strategy that protects the poor and maximizes the growth impact of government spending. In this regard, the mission emphasized the importance of strengthening fiscal reporting and monitoring. All spending related to government operations, including on the building of a power plant (Centrale électrique du Congo) and on energy subsidies, should be included in the fiscal framework in order to facilitate fiscal policy management. The mission also underlined the need to take a multi-year perspective in fiscal planning and improve commitment controls. This would help to prevent the accumulation of domestic spending arrears and curtail increases in public debt that could significantly undermine the resilience of the economy and fiscal space. The mission recommends anchoring the fiscal adjustment on a reduction in the non-oil primary deficit, to take into account the lower international oil prices and the limited remaining lifetime of oil reserves.

“The credibility and quality of fiscal consolidation plans should be supported by strengthening public financial management (PFM), including high-frequency monitoring of budget execution and the government’s cash-flow situation. More broadly, the authorities are encouraged to follow up on the recommendations from the Public Expenditure Management and Financial Accountability Review by the World Bank and other development partners.

“The mission encourages the authorities to make progress in developing the financial system, enhancing financial inclusion, and sustaining financial stability. Such reforms are essential to underpin broader private sector development through greater economic diversification, the promotion of small and medium-sized enterprises, and reducing inequality.

“The macroeconomic policy and structural reform agenda would also benefit from enhanced transparency. Timely and comprehensive data is essential to prepare meaningful assessments of the macroeconomic policy stance. The mission encourages the authorities to step up efforts to strengthen the quality of national statistics, including by ensuring that government agencies unify their data and by operationalizing the National Strategy for Statistics Development (NSSD).

“The mission met with the State Minister of Economy, Finance, Planning, Public Portfolio and Integration, Mr. Ondongo; National Director of the Central Bank, Mr. Ondaye; and other senior officials. Meetings were also held with representatives of the parliament, the private sector, and development partners.

“The IMF stands ready to continue to work with the Congolese authorities to address their policy challenges. The Executive Board of the IMF is expected to consider the staff report on the 2015 Article IV consultation in July 2015. The mission wishes to thank the authorities for their warm hospitality and constructive cooperation.”