IMF Executive Board Approves US$448.6 Million Arrangement Under the Extended Credit Facility (ECF) for the Republic of Congo
July 11, 2019
- Executive Board decision allows an immediate disbursement of SDR32.4 million (about US$44.9 million) to the Republic of Congo.
- The Republic of Congo’s ECF program supports the authorities’ efforts to restore fiscal sustainability and rebuild regional reserves while improving governance and protecting vulnerable groups.
- The Congolese authorities have stepped up efforts in 2018 and 2019 to address the economic crisis and the associated governance challenges.
On July 11, 2019, the Executive Board of the International Monetary Fund (IMF) approved a three-year arrangement under its Extended Credit Facility (ECF) with the Republic of Congo for SDR324 million (about US$448.6 million, or 200 percent of the Republic of Congo’s quota in the Fund) to support the country’s economic and financial reform program.
The ECF-supported program aims to help the Republic of Congo restore macroeconomic stability, including debt sustainability, and lay the foundations for higher and more inclusive growth. It also seeks to improve governance to achieve greater efficiency and transparency in the management of public resources, especially in the oil sector. The Fund-supported program will contribute positively to the regional strategy and stability efforts of the Central African Economic and Monetary Union (CEMAC).
The IMF Executive Board decision enables an immediate disbursement of SDR32.40 million, about US$44.9 million. Disbursements of the remaining amount will be phased in over the duration of the program, subject to semi-annual reviews of the Fund-supported program by the Executive Board.
Following the Executive Board discussion on the Republic of Congo, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, stated:
“The Republic of Congo was hit hard by the oil price shock and delayed fiscal adjustment, amidst governance challenges and unsustainable debt. The shock eroded fiscal and external buffers and triggered a deep recession. To address these challenges, the Fund-supported program focuses on (i) fiscal consolidation and debt restructuring; (ii) strengthening human capital, including through measures that protect vulnerable groups; and (iii) structural reforms, with a strong focus on governance, to promote economic diversification and achieve more inclusive growth.
“The authorities have started to implement an ambitious program of fiscal consolidation and structural reforms. Domestic revenue mobilization will be a key pillar of the strategy; the authorities should continue to implement the measures included in their 2019 budget, with a focus on broadening the tax base and strengthening compliance, while protecting social spending for education, health, and vulnerable groups, including women’s programs. It will also be critical to increase the transparency of public finances, improve public investment efficiency, and eliminate off-budget spending.
“The recent agreement to restructure the Republic of Congo’s bilateral debt should be accompanied by continued good faith efforts to restructure commercial debt to continue to ensure the country’s debt sustainability.
“The authorities have implemented an ambitious package of reforms to improve governance. Additional reforms will be needed to strengthen the rule of law and the AML/CFT framework and operationalize the newly created anti-corruption commission.
“The Republic of Congo’s medium-term outlook is subject to risks stemming from oil price volatility, possibly uneven policy implementation and weaker security conditions. However, the authorities have already taken decisive steps to improve their fiscal position and have demonstrated a recent track record of implementation of structural reforms. Program risks should be manageable provided the authorities continue to pursue prudent policies.
“The program is supported by union-level efforts to maintain an appropriate monetary policy stance, build-up regional reserves, and promote financial sector stability.”
Annex
Recent Economic Developments
The Republic of Congo has been suffering one of its worst economic crises in recent years. The crisis was triggered by the sharp decline in oil prices since 2014 and delays in the implementation of an effective policy response. It has resulted in an economic recession, large fiscal and current account deficits, unsustainable debt, an accumulation of a large stock of domestic arrears and an erosion in confidence associated with weak governance.
In this context, the authorities took decisive policy action in 2018 and 2019. They approved prudent budgets for 2018 and 2019, initiated the execution of a rigorous fiscal consolidation program, and implemented an ambitious structural reform agenda with a strong focus on improvements in governance. They also stepped-up efforts to finalize an agreement to restructure the Republic of Congo’s bilateral debt with China, which represents a decisive step to restore debt sustainability.
Program Summary
The ECF-supported program for the Republic of Congo aims at restoring fiscal sustainability through strong fiscal consolidation and debt restructuring efforts; improving governance (including PFM) to promote a more efficient use of public resources and protecting vulnerable groups from the burden of adjustment. The program also aims to support regional stabilization efforts.
It is expected that Fund support would help catalyze international assistance, including through debt restructuring.
The fiscal objectives of the program will be achieved through fiscal consolidation, strong revenue mobilization measures, and reallocation of resources toward investment and social spending. Debt restructuring efforts also play a key role to restore debt sustainability. In this regard, the conclusion of a debt restructuring agreement with China must be accompanied by further restructuring of external commercial debt, in line with the authorities’ debt restructuring strategy. The program envisages clearance of external arrears to official creditors by the first review of the ECF-arrangement. It also plans the repayment of domestic arrears during the program period to support growth and preserve financial sector stability.
While the initial response to the crisis was slow and raised issues of weak governance and lack of transparency, recent reform efforts are heading in the right direction. Over the last year alone, the authorities have implemented a large package of reforms to improve governance and transparency.
Program implementation remains subject to significant risks, including volatility in oil prices, and possible difficulties to sustain reform efforts over time. However, these risks are mitigated by strong political commitment to the program, at the highest political level, as demonstrated by all the reforms the authorities have implemented prior to the program approval.
Background
The Republic of Congo, which became member of the IMF on July 10, 1963, has an IMF quota of SDR162 million.
For additional information on the IMF and the Republic of Congo, see:
https://www.imf.org/en/Countries/COG
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Republic of Congo: Selected Economic and Financial Indicators, 2016–23 |
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|
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
|
|
Prel. |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
|||
|
(Annual percentage change unless otherwise specified) |
||||||||
|
Production and prices |
||||||||
|
GDP at constant prices |
-2.8 |
-1.8 |
1.6 |
5.4 |
1.6 |
1.9 |
0.1 |
1.3 |
|
Oil |
-1.5 |
15.3 |
23.9 |
15.8 |
-0.3 |
-1.6 |
-8.8 |
-6.1 |
|
Non-oil |
-3.2 |
-6.2 |
-5.5 |
1.0 |
2.5 |
3.6 |
4.0 |
4.1 |
|
GDP at current prices |
-8.7 |
12.4 |
24.8 |
0.8 |
0.8 |
0.5 |
-2.7 |
0.3 |
|
GDP deflator |
-6.1 |
14.4 |
22.9 |
-4.3 |
-0.8 |
-1.4 |
-2.8 |
-1.0 |
|
Consumer prices (period average) |
3.2 |
0.4 |
1.2 |
1.5 |
1.8 |
2.6 |
2.8 |
3.0 |
|
Consumer prices (end of period) |
0.0 |
1.8 |
0.9 |
2.0 |
2.5 |
2.7 |
3.0 |
3.0 |
|
External sector |
||||||||
|
Exports, f.o.b. |
-6.7 |
38.2 |
44.6 |
0.7 |
-1.8 |
-2.5 |
-7.2 |
-2.6 |
|
Imports, f.o.b. |
11.2 |
-43.2 |
5.0 |
2.2 |
3.1 |
3.8 |
1.1 |
0.3 |
|
Export volume |
-14.5 |
29.1 |
28.4 |
14.6 |
-1.0 |
-1.9 |
-9.7 |
-7.4 |
|
Import volume |
0.1 |
-37.6 |
5.9 |
5.6 |
1.2 |
2.5 |
0.6 |
-0.5 |
|
Terms of trade (deterioration - ) |
-5.5 |
9.6 |
13.4 |
-8.9 |
-2.7 |
-2.0 |
2.4 |
4.4 |
|
Current account balance (percent of GDP) |
-63.5 |
-5.9 |
6.7 |
5.6 |
5.1 |
1.6 |
-1.4 |
-1.9 |
|
Net foreign assets |
-69.1 |
-54.2 |
12.3 |
57.5 |
69.1 |
41.0 |
9.1 |
7.4 |
|
External public debt (percent of GDP) |
91.4 |
80.0 |
61.3 |
58.1 |
56.6 |
55.5 |
54.2 |
52 |
|
Monetary sector |
||||||||
|
Broad money |
-15.4 |
-10.4 |
-4.0 |
7.5 |
9.4 |
12.2 |
3.4 |
2.7 |
|
Credit to the private sector |
7.1 |
-5.4 |
-2.7 |
2.6 |
4.8 |
6.8 |
7.5 |
7.8 |
|
Credit to private sector (percent of non-oil GDP) |
42.6 |
45.0 |
44.6 |
44.8 |
45.0 |
45.2 |
45.4 |
45.5 |
|
(Percent of GDP) |
||||||||
|
Investment and saving |
||||||||
|
Gross national saving |
-7.0 |
23.9 |
23.8 |
26.4 |
27.7 |
26.1 |
25.7 |
27.2 |
|
Public |
9.8 |
1.6 |
9.2 |
12.7 |
13.7 |
14.2 |
15.0 |
14.7 |
|
Private |
-16.8 |
22.3 |
14.6 |
13.7 |
14.0 |
11.9 |
10.7 |
12.5 |
|
Gross investment |
56.5 |
29.8 |
17.1 |
20.9 |
22.6 |
24.5 |
27.1 |
29.1 |
|
Public |
15.5 |
7.9 |
2.2 |
4.5 |
5.4 |
6.0 |
6.5 |
6.8 |
|
Private |
41.0 |
21.9 |
14.9 |
16.4 |
17.2 |
18.5 |
20.3 |
22.1 |
|
(Percent of non-oil GDP, unless otherwise indicated) |
||||||||
|
Central government finances |
||||||||
|
Total revenue |
54.1 |
53.6 |
74.2 |
78.7 |
77.7 |
74.8 |
71.2 |
67.5 |
|
Oil revenue |
24.1 |
25.2 |
50.6 |
48.3 |
43.8 |
40.7 |
35.9 |
32.0 |
|
Nonoil revenue (including grants) |
28.6 |
28.4 |
23.6 |
30.4 |
33.9 |
34.1 |
35.3 |
35.5 |
|
Total expenditure and net lending |
85.9 |
67.8 |
57.4 |
59.8 |
59.2 |
57.4 |
54.8 |
53.3 |
|
Current |
46.8 |
48.4 |
51.9 |
48.5 |
46.1 |
43.7 |
41.2 |
40.1 |
|
Capital (and net lending) |
30.2 |
15.2 |
5.5 |
11.3 |
13.1 |
13.7 |
13.5 |
13.2 |
|
Off-budget |
8.9 |
4.3 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|
Overall balance (deficit -, payment order basis, percent of GDP) |
-20.1 |
-7.4 |
6.6 |
7.5 |
7.6 |
7.6 |
7.9 |
7.3 |
|
Non-oil primary balance (- = deficit) |
-51.7 |
-35.3 |
-28.1 |
-24.8 |
-21.6 |
-20.1 |
-16.9 |
-15.9 |
|
Basic primary fiscal balance (- = deficit)1 |
-18.3 |
-1.9 |
24.8 |
23.4 |
22.2 |
20.6 |
19.0 |
16.1 |
|
Reference fiscal balance (percent of GDP)2 |
-1.5 |
-0.7 |
-4.7 |
-0.8 |
2.6 |
4.9 |
5.7 |
5.2 |
|
Primary balance (percent of GDP) |
-17.4 |
-5.2 |
8.9 |
9.3 |
9.2 |
9.0 |
9.1 |
8.3 |
|
Financing gap (CFAF billion)3 |
0.0 |
0.0 |
0.0 |
362 |
411 |
245 |
66 |
-35 |
|
Total public debt (percent of GDP) |
118.6 |
117.5 |
87.8 |
81.7 |
76.6 |
71.6 |
66.8 |
60.7 |
|
External public debt service |
23.4 |
24.0 |
24.6 |
37.6 |
32.0 |
22.8 |
18.9 |
12.5 |
|
External public debt |
275.5 |
293.4 |
210.9 |
187.6 |
178.9 |
172.0 |
160.8 |
151.0 |
|
(Billions of CFA francs, unless otherwise indicated) |
||||||||
|
Nominal GDP |
4,616 |
5,189 |
6,476 |
6,529 |
6,578 |
6,611 |
6,432 |
6,449 |
|
Nominal oil GDP |
1,708 |
2,493 |
3,932 |
3,926 |
3,863 |
3,723 |
3,343 |
3,133 |
|
Nominal non-oil GDP |
2,908 |
2,695 |
2,544 |
2,603 |
2,715 |
2,888 |
3,089 |
3,316 |
|
Nominal GDP in US$ (millions) |
7,787 |
8,932 |
11,664 |
11,382 |
11,592 |
11,715 |
11,472 |
11,532 |
|
World oil price (U.S. dollars per barrel) |
43 |
53 |
68 |
59 |
59 |
58 |
58 |
58 |
|
Oil production (Millions of barrels) |
85 |
98 |
121 |
140 |
140 |
137 |
125 |
118 |
|
Nominal Exchange rate (CFA/USD, period average) |
592.8 |
580.9 |
555.2 |
… |
… |
… |
… |
… |
|
REER (percentage change) |
4.1 |
0.5 |
1.2 |
… |
… |
… |
… |
… |
|
Sources: Congolese authorities; and IMF staff estimates and projections. |
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1 Revenue excluding grants minus total expenditures (excluding interest payments and foreign-financed public investment). |
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|
2 Overall balance minus 20 percent of oil revenues and minus 80 percent of the oil revenue in excess of the average observed during the three previous years. |
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|
3 Before IMF-ECF financing, other expected financing and exceptional financing due to external debt restructuring net of restructured contingent liabilities. |
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