Press Release No. 21/49

IMF Staff Completes Review Mission for the First Review of the Extended Credit Facility (ECF) for the Republic of Congo

February 26, 2021

• Significant progress has been made in discussions with the Congolese authorities on economic and financial policies that could facilitate the conclusion of the first review of the Extended Credit Facility arrangement.
• The severe economic contraction experienced in 2020, due to the Covid-19 pandemic and significant oil price declines, is expected to ease this year.
• Rapidly concluding debt restructuring agreements, consistent with restoring debt sustainability, will be critical for sustainable development and poverty reduction.

Washington, DC: An International Monetary Fund (IMF) team led by Pritha Mitra, Mission Chief for the Republic of Congo, conducted virtual discussions with the Congolese authorities during February 18 to 25, 2021 on the first review of the country’s three-year Extended Credit Facility arrangement. The program was approved by the IMF Executive Board on July 11, 2019 (see press release)

At the end of the mission, Ms. Mitra issued the following statement:

“The Covid-19 pandemic has had significant humanitarian and economic consequences for the people of Congo. The economy contracted by [8] percent in 2020, mainly due to the pandemic and measures to curb it—such as border closures, curfews and social distancing—and lower oil prices and production. As these factors improve in 2021, economic growth is expected to pick up to [0.2] percent. Nevertheless, domestic arrears and underlying structural weaknesses will continue to weigh on non-oil economic growth.

“Faced with a sharp drop in oil revenues, the overall fiscal position deteriorated substantially in 2020. In contrast, the non-oil primary deficit improved to 15 percent. Non-oil revenues held up, despite the recession, owing to revenue-enhancing measures such as the introduction of electronic payments and a broadening of the tax base. Meanwhile, substantial pandemic-related spending was more than offset by lower transfers (to the refinery and Central Electric Congo (CEC)) and under-execution of foreign-financed capital spending due to the pandemic.

“In 2021, improved oil revenues will raise the overall fiscal position into surplus. However, the non-oil primary deficit will expand to [17] percent to accommodate increased social and capital spending to mitigate the pandemic’s impact and begin building a resilient recovery.

“Congo’s debt remains unsustainable. After reaching [103] percent of GDP in 2020, public debt is expected to fall below [100] percent of GDP this year. Congo has received debt service relief from official creditors in 2020 and the first half of 2021 under the G20 Debt Service Suspension Initiative DSSI initiative.

“Structural reforms are gradually advancing. In the coming weeks, the authorities intend to submit amendments to the anti-corruption law to parliament and finalize the audit of domestic arrears. The authorities are encouraged to continue strengthening public financial management through close monitoring of spending, audit of expenses related to the pandemic, and accurate centralized collection of oil and non-oil revenues. These measures would result in efficiency gains and increased transparency in the management of public resources.

“The authorities have made advances in debt restructuring discussions with their external creditors. However, they must step up their efforts and promptly complete the restructuring process in a manner that restores medium-term debt sustainability—which is critical for sustainable development and poverty reduction.

“Regarding past performance under the ECF arrangement, three out of five quantitative performance criteria for end-June 2019 were met; those on net domestic financing of the central government and on the non-accumulation of new arrears on public and government guaranteed external debt were missed. Since early-2020, the authorities have repaid or rescheduled most external arrears and are committed to developing a debt management strategy to avoid a recurrence. While structural benchmarks were not met on time, those essential for improving governance and transparency were eventually implemented.

“The Congolese authorities and the IMF team made significant progress in discussing policies and reforms that could form the basis for the IMF Executive Board to consider the first review of the ECF arrangement. These discussions will continue in the weeks ahead.

“The mission met with the Minister delegated to the Minister of Finance and the Budget, Mr. Ludovic Ngatse and other senior government officials. The IMF mission also met with representatives of civil society, the private sector, and the donor community.

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