Press Release No. 21/226

IMF Staff Completes Virtual 2021 Article IV Mission to the Republic of Congo

July 23, 2021

• Economic recovery remains elusive in 2021 as the impetus from the strong oil price rebound has been broadly offset by continued weaknesses in oil production, the impact of pandemic mitigation measures, persistent domestic payments arrears, and underlying structural weaknesses.
• Non-oil sectors are expected to gradually recover in the years ahead, but advancing structural reforms aimed at improved economic management, governance, and support for private sector activity will be critical for the strength of the recovery.
• Medium-term budgetary discipline, increased use of concessional financing, and greater support from development partners will also be essential for achieving stronger and more resilient economic growth.

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 July 14 to 21, 2021 on the 2021 Article IV consultation.

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

“The Covid-19 pandemic and ensuing oil price collapse had an important impact on the Congolese economy in 2020. Measures taken to contain the pandemic—notably curfews, lockdowns, border closures, and social distancing—aggravated by the impact of lower oil prices and production and resulted in an 8.2 percent economic contraction in 2020.

“Recovery remains elusive in 2021, with expectations of a 0.2 percent contraction in economic activity. Impetus from the strong oil price rebound has been broadly offset by continued weaknesses in oil production and a lack of dynamism in the non-oil economy resulting from pandemic mitigation measures, persistent domestic payment arrears, and underlying structural weaknesses. However, vaccination delivery is progressing, notwithstanding a slow start. Inflation is subdued, anticipated to average 2.0 percent in 2021.

“In the years ahead, recovery in non-oil sectors is expected to gradually gain momentum as the authorities’ efforts to diversify the economy, boost social inclusion, and adapt to climate change take hold. Advancing structural reforms aimed at improved economic management, governance, and support for private sector activity—including raising access to finance and increased social and infrastructure spending—will be critical for strengthening external competitiveness and economic recovery.

“Fiscal policy continues to balance difficult tradeoffs: the fight against the pandemic, essential support for a resilient economic recovery, and prudent debt management. To this end, the 2021 non-oil primary deficit is expected to widen to 17.2 percent of non-oil GDP, driven by spending on social assistance, healthcare (including vaccination), and education. Reforms, initiated in 2019, resulting in steady reductions of oil-related transfers to the refinery and to Congo Electric Power Company (CEC), continue. In the same vein, implemented domestic revenue-enhancing measures—such as the introduction of electronic payments and a broadening of the tax base—also continue to support non-oil revenues despite the economic contraction. Oil revenue windfalls are helping to finance the deficit and repay domestic arrears and external debt, including recently restructured external commercial loans.

The authorities are encouraged to continue addressing significant debt vulnerabilities by strengthening debt management and resolving external payments arrears. These efforts, along with higher oil prices and debt service relief under the G20 DSSI, would help reduce the debt burden.

“In this context, the authorities are urged to pursue medium-term budgetary discipline. Recently implemented fiscal reforms would continue to support a gradual reduction in the non-oil deficits. In addition, fiscal efforts should be strengthened by gradually phasing out subsidies to the national oil refinery and improving the billing process and coverage to reflect actual electricity consumption with a view to recovering production costs—while applying social assistance to shelter the poor—formulate a plan to settle remaining domestic arrears, and advance public investment management. Exclusive use of concessional financing will also be critical for containing public debt. These additional measures, coupled with greater support from development partners, would not only reduce fiscal vulnerabilities but also increase fiscal space for accelerating investment in infrastructure, capacity, and reform implementation needed to reduce poverty and build a stronger and more resilient recovery.

“Structural reforms are advancing but slowly. In the coming months, the authorities intend to finalize the audit of domestic arrears for 2017-18 and submit to parliament amendments to the anti-corruption law and new legislation reforming the Court of Auditors. The authorities are encouraged to continue strengthening public financial management through close monitoring of spending, auditing expenses related to the pandemic, and accurate centralized collection of oil and non-oil revenues—resulting in efficiency gains and increased transparency in the management of public resources.

“The mission met with the Finance Minister Mr. Rigobert Roger Andely, the Minister of the Economy, Planning and Regional Integration Madame Ghislaine Ingrid Ebouka Babackas, the Minister for the Environment and Sustainable Development, Madame Arlette Soudan-Nonault and other senior government officials. The IMF mission also met with representatives of civil society, the private sector, and development partners.

"The mission would like to thank the Congolese authorities for rich and productive discussions and excellent cooperation."