Press Release No. 18/425

IMF Staff Completes Staff Visit to the Republic of Congo

November 14, 2018

• Inflation is projected to remain below 2 percent, and the strong expansion in oil exports is expected to help produce the first surplus inthe external current account since 2014.
• Substantial progress has been achieved in the implementation of the authorities’ structural reform agenda.
• The IMF team will continue discussions with the authorities on the remaining steps needed to bring the Republic of Congo’s request for athree-year arrangement under the Extended Credit Facility to theconsideration of its Executive Board.

An International Monetary Fund (IMF) mission led by Alex Segura-Ubiergo visited Brazzaville during November 6-14 to continue discussions toward a possible arrangement under the Extended Credit Facility (ECF). The proposed ECF-supported program aims to help the Republic of Congo restore macroeconomic stability and achieve higher and more inclusive growth. In particular, the program seeks to restore debt sustainability and targets a wide range of reforms to improve governance, reduce corruption, and achieve greater transparency and efficiency in the management of public resources, especially in the oil sector. The successful implementation of the program will also contribute to the external stability of the Central African Economic and Monetary Union (CEMAC) and build on the collective efforts of the other member states and regional institutions of the currency union.

At the conclusion of the IMF staff visit, Mr. Segura-Ubiergo issued the following statement:

“Economic activity is stabilizing, but this reflects diverging trends in the oil and non-oil sectors. While growth in the oil sector is strong, the non-oil sector remains in a deep recession with a recovery which is likely to be slower than previously expected. As a result, overall growth is unlikely to exceed 1 percent in 2018 – one percentage point lower than earlier projections. Growth could recover further and reach about 3 percent in 2019, supported by rising oil production and recovering non-oil growth.

“Inflation is projected to remain below 2 percent, and the strong expansion in oil exports is expected to help produce the first surplus in the external current account since 2014. Financial conditions remain very tight, and non-performing loans are rising.

“Fiscal consolidation efforts have continued, but efforts are likely to fall short of earlier commitments for 2018. The non-oil primary deficit is expected to decline from 35.7 percent of non-oil GDP in 2017 to 31.5 percent in 2018, this adjustment being about half the level that had been previously expected.

“While the authorities have contained spending levels, non-oil revenues are projected to decline by 6 percent of non-oil GDP compared with 2017 -- about 20 percent lower than the initial target for the year. At the same time, thanks to a substantial expansion in oil revenues, the overall fiscal balance is expected to shift into surplus in 2018.

“To address non-oil revenue underperformance in 2018, a number of administrative and institutional issues will require immediate action. For 2019, the mission recommended adjustments to the draft budget, to incorporate the impact of lower economic activity on non-oil revenues, and the need to reduce non-priority spending. Reforms are needed to reduce fuel subsidies and increase the efficiency of decentralized government units that continue to register operational deficits. At the same time, there is a need to protect critical social spending in favor of the most vulnerable groups of the population.

“Substantial progress has been achieved in the implementation of the authorities’ structural reform agenda, including the publication of a diagnostic study on governance, the introduction of a legal requirement to publish annual audited financial statements of the Congolese national oil company (SNPC), and the online publication of production sharing agreements in the oil sector. Additional progress is needed to strengthen the legal frameworks for the Commission on Transparency and the asset declarations regime, and to increase transparency in the management and accounting of oil revenues.

“The IMF team will continue discussions with the authorities on the remaining steps needed to bring the Republic of Congo’s request for a three-year arrangement under the Extended Credit Facility to the consideration of its Executive Board. This will require some adjustments to the 2019 Draft Budget, implementation of reforms to improve governance and transparency, and the provision of explicit assurances on financing from external official creditors, including debt relief, which is needed to restore debt sustainability.

“The mission would like to thank the Congolese authorities for the constructive discussions and warm hospitality.”