Press Release No. 14/528

Press Release: IMF Staff Concludes Visit to the Republic of Congo

November 19, 2014

A team of the International Monetary Fund (IMF) led by Ms. Dalia Hakura, visited Brazzaville during November 11−19, 2014. The mission reviewed recent macroeconomic developments and the near-term outlook, discussed the 2014 supplementary budget, the draft 2015 budget and sought the authorities’ input on the agenda for the 2015 Article IV consultation with the Republic of Congo, planned for April 2015.

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

“Macroeconomic performance has been broadly satisfactory thus far in 2014. Growth is projected at 6 percent in 2014, in light of a slight rebound in oil production. This will also be supported by strong non–oil growth, due mainly to higher government infrastructure spending. Year-on-year inflation has continued to decelerate and the overall price level in June 2014 was virtually unchanged from a year ago, largely as a result of declining food prices. The mission notes that the recently approved 2014 supplementary budget provides for an elevated level of government spending, mainly due to preparations for the All Africa Games. This elevated spending implies a deviation from the fiscal rule that the authorities introduced in 2013. If fully implemented, the budget will considerably widen the non-oil primary deficit and hold back fiscal savings in 2014.

“Against the backdrop of the limited remaining lifetime of oil reserves, the recent decline in international oil prices makes it more urgent for the authorities to revert to a path of fiscal consolidation starting from 2015, while enhancing the efficiency of government spending. In this regard, targeting an early reduction of the non-oil primary deficit that also limits the growth of government spending by more than currently envisaged in the 2015 budget would help to safeguard fiscal and external buffers and contribute to mitigating risks to macroeconomic stability in the medium-term. In a context of rising global oil production, the Republic of Congo is facing an uncertain external environment. There are downside risks to oil prices from a weaker global economic outlook, including slower growth in China.

“For the 2015 budget, the authorities should examine the scope for larger fiscal adjustment while safeguarding targeted social spending and growth-enhancing capital spending. The mission welcomes the authorities’ intention to prioritize completion of basic infrastructure projects whilst also taking steps to begin the conditional cash transfer program. The authorities are also encouraged to follow up on recommendations from the ongoing Public Expenditure Management and Financial Accountability Review by the World Bank and other development partners. This should help to identify reform actions needed to strengthen budget execution, procurement and disbursement processes.

“The authorities should continue with ongoing structural reforms to support inclusive growth in the non–oil sector. The mission welcomes the authorities’ near term focus on ensuring access to water for all, and encourages continuing efforts to improve the business climate, which remains one of the most challenging in Sub–Saharan Africa. These reforms will be important to unlocking the potential of the private sector in the Republic of Congo.

“The mission notes the authorities’ continued commitment to a prudent debt management policy. Against the backdrop of recent increases in external debt, which now stands at about 30 percent of Gross Domestic Product, the continued reliance on concessional borrowing will help maintain long–term debt sustainability and preserve the hard won gains of the Highly Indebted Poor Countries/Multilateral Debt Relief Initiative granted in 2010.

“The execution of the Republic of Congo’s macroeconomic policy and structural reform agenda would also benefit from enhanced transparency. The long delays in data availability hamper the timely assessment of the macroeconomic policy stance. In this regard, the mission welcomes the authorities’ efforts to strengthen the National Institute of Statistics through the development of a national statistics action plan with IMF technical assistance.

“The mission met with the State Minister of Economy, Finance, Planning, Public Portfolio and Integration, Mr. Ondongo, Minister at the Presidency in Charge of Territory Planning and Large Projects, Mr. Bouya, Special Advisor to the President, Mr. Gokana, Deputy Minister in Charge of Planning and Integration, Mr. Mokoko, National Director of the Central Bank, Mr. Ondaye, and other senior officials. The mission also met with representatives of the private sector, civil society, and development partners.

“We thank the authorities for the warm welcome and cooperation given to the mission, and wish them well in the important and challenging policy tasks they face.”