IMF Staff Reaches Staff-level Agreement on an Extended Credit Facility Arrangement with the Republic of Congo

IMF News, November 8, 2021

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IMF staff reached a staff-level agreement with the authorities of the Republic of Congo on a three-year program under the Extended Credit Facility (ECF) in the amount of SDR 324 million or $456 million.
Program objectives:
- Maintain macroeconomic stability.
- Support economic recovery in the context of the pandemic.
- Foster higher, more resilient, and inclusive growth in the coming years.
Mission leadership and timing:
- An IMF team led by Pritha Mitra, Mission Chief for the Republic of Congo, conducted a virtual mission during October 7-15 and November 4, 2021.

Near-term growth projection:
- Real GDP growth projected to rise from -0.2 percent in 2021 to 2.4 percent in 2022.
Drivers of the recovery:
- Higher oil prices.
- Rebound in Congo’s oil production.
- Vaccine rollout.
- Social spending.
- Domestic arrears repayments.
- Expansion of agriculture, mining, and services.
Key downside risks:
- New waves of the pandemic.
- Volatile oil prices.
Uncertainty acknowledged around the outlook.

Fiscal policy role:
- Central to strengthening the recovery while managing risks and maintaining debt sustainability.
- Prioritize social and infrastructure spending, especially in health care, education, and agriculture, in line with the authorities’ National Development Plan 2022-26.
Specific fiscal target:
- Target a non-oil primary deficit of 15.5 percent of non-oil GDP in the budget for fiscal year 2022.
- Improved revenues expected to reduce the non-oil primary deficit by about 1.7 percent of non-oil GDP relative to 2021.
Revenue and spending measures to support objectives:
- Raise tax arrears collection.
- Reduce tax and customs exemptions.
- Continue reforms in tax policy and administration.
- Reduce transfers to state-owned enterprises (SOEs).
Medium-term fiscal measures recommended:
- Review of the fiscal regime in the oil sector.
- More significant removal of VAT exemptions and streamlining of other tax expenditures.
- Improved procurement practices.
- More effective public investment management.

Debt position and classification:
- Projected at 94 percent of GDP at end-2021.
- Debt is sustainable but significant vulnerabilities persist; key vulnerabilities include liquidity risks and exposure to negative oil price shocks.
- Pending clearance of external arrears and conclusion of remaining restructuring negotiations, debt is classified as being in “distress”.
Short-term liquidity support and implications:
- Immediate liquidity needs are supported by the G20 Debt Service Suspension Initiative (DSSI).
- Addressing challenges will require a strengthened debt management strategy and improved debt statistics.
- Measures will complement ongoing substantial external debt repayments—following a restructuring of external commercial loans—and domestic arrears repayments.
Domestic arrears and financial sector impact:
- Repayment of domestic arrears is enabling a reduction of non-performing loans and strengthening financial stability.
- Rapid finalization of the audit of domestic arrears accumulated during 2019-20 and clear communication of any new domestic arrears’ repayment plans are critical.

Importance:
- Advancing reforms in governance, transparency, and anti-corruption is essential to improving the effectiveness of public spending, the business environment, and economic confidence.
Planned measures highlighted:
- Submission to Parliament of the new anti-corruption law.
- Audit and publication of information related to oil production and the subsequent oil revenues actually received by the government.
- Strengthening public financial management through the audit of expenses related to the pandemic and applying greater control and transparency over public spending and oil and non-oil revenue collection.
External support:
- Greater support from development partners will be critical to successful implementation of the authorities’ economic and structural reform strategy.

Stakeholder meetings:
- The mission met with the Minister of Finance, Budget and Public Portfolio, Mr. Rigobert Roger Andely, and other senior government officials, as well as representatives of civil society, the private sector, and development partners.
Follow-up:
- Based on the preliminary findings of the mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.
Statement note:
- End-of-Mission press releases convey preliminary findings; the views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

IMF Press Release No. 21/325, November 8, 2021 — IMF Communications Department