Press Release No. 21/146

IMF Mission Reaches Staff-Level Agreement with the Democratic Republic of the Congo on a Three-Year, US$1.5 Billion Financing Package

May 28, 2021

• The IMF team reached a staff-level agreement on a three-year program under the Extended Credit Facility (ECF) arrangement to help the country recover from the pandemic, preserve macroeconomic stability, and advance the reform momentum to raise and sustain inclusive growth.
• Key policy actions under this program will focus on building fiscal space for much-needed investment and social spending, enhancing the monetary framework and financial supervision, and improving economic governance and transparency.
• This staff level agreement is subject to IMF management approval and consideration for decision by the IMF Executive Board.

Washington, DC: In response to a request from the authorities, an International Monetary Fund (IMF) mission led by Mauricio Villafuerte, Mission Chief for the Democratic Republic of the Congo, held virtual meetings during May 6–27 to discuss IMF support to the authorities’ economic reform program.

At the end of the mission, Mr. Villafuerte issued the following statement:

“IMF staff completed policy discussions with the authorities on a medium-term program that could be supported by IMF resources of about US$1.5 billion over three years under an Extended Credit Facility (ECF).

“The economy of the Democratic Republic of the Congo has been severely impacted by the COVID-19 pandemic. GDP is estimated to have grown by only 1.7 percent in 2020 despite the expansion of the extractive sector by almost 10 percent and is projected to expand by 4.9 percent in 2021. The impact of the pandemic on both revenue and spending negatively affected the public finances, inflation peaked at 15.7 percent year-on-year in August 2020 in parallel with a quick depreciation of the Congolese franc. The Stability Pact signed between the Central Bank of Congo (BCC) and the central government, the disbursement under the Rapid Credit Facility (RCF) in April 2020 (see IMF Press Release No. 20/182 ), and additional support from other development partners helped stabilize the economic and financial situation and close financing gaps, but substantial fiscal and external financing needs remain over the medium-term.

“The authorities’ medium-term program is centered on supporting the post-COVID-19 recovery and revitalizing the reform agenda to raise and sustain inclusive growth and reduce poverty, in line with the government’s priorities stated in the 2019-23 National Strategic Development Plan. Specifically, the program aims at building fiscal space for much needed social spending and investment, enhancing the monetary framework and financial supervision, and improving economic governance and transparency. IMF financial support is also expected to catalyze financial support from other development partners and help foster private sector investment.

“Fiscal policy under the program is geared towards increasing domestic revenue mobilization. Ambitious medium-term revenue targets will be supported by a comprehensive revenue strategy based on both tax administration and policy measures, including reestablishing the proper functioning of the VAT and rationalizing tax expenditures and non-tax revenues. This should pave the way for increases in social spending, notably in the health and education sectors, as well as to scale up public investment, while preserving debt sustainability. The composition of expenditures will be enhanced by limiting non-priority spending and improved budgeting of wage and pension outlays.

“The authorities aim at strengthening and modernizing the monetary policy and regulatory and supervisory frameworks to maintain low and stable inflation, strengthen financial sector stability, and foster financial inclusion. They commit to reinforce central bank autonomy by bringing its Board composition in compliance with the 2018 Central Bank Law and by regularizing the outstanding credit to the government. In addition, the authorities will revise the reserve requirement framework and discontinue the provision of advances and guarantees of the BCC to the government.

“Improving governance and fighting against corruption are critical, with continued emphasis on the management of extractive resources, on improving public financial management, and on fighting money laundering. We welcome the authorities’ commitment to reinforce key anti-corruption institutions, including the Cour des Comptes and the Inspection Générale des Finances. The authorities acknowledge the importance of improving the business climate and attracting private investment to foster high and inclusive economic growth.

“The mission met with Prime Minister Jean-Michel Sama Lukonde Kyenge, Minister of Finance Nicolas Kazadi, Minister of Budget Aimé Boji, Minister of Health Jean Jacques Mbungani Mbanda, Minister of Public Enterprises Adèle Kahinda Mayina, BCC Governor Deogratias Mutombo Mwana Nyembo, other senior officials, development partners, the private sector and civil society organizations representatives. The mission thanks the Congolese authorities for their cooperation and constructive discussions.”