Press Release No. 22/227

IMF Executive Board concludes the first review of the Extended Facility Arrangement for the Republic of Congo

June 24, 2022

• Conclusion of this review enables the Republic of Congo to draw the equivalent of SDR 64.80 million (about US$ 87 million) as a disbursement under the Extended Credit Facility arrangement.
• Economic recovery is gaining momentum but remains fragile against the backdrop of the COVID-19 pandemic and global consequences of the war in Ukraine. More vigorous economic activity is being held back by rising inflation, as global food and oil prices surge.
• Maintaining momentum in structural reforms and improving governance and transparency will be critical to attaining higher, more resilient, and inclusive growth. Key among these are reforms in public financial management (PFM), anti-corruption measures, and energy sector reforms.

Washington, DC – June 24, 2022: The Executive Board of the International Monetary Fund (IMF) concluded today the 1^st review of the Republic of Congo’s SDR 324.0 million arrangement under the Extended Credit Facility (ECF), which was approved on January 21, 2022. This allows for the immediate disbursement of SDR 64.80 million (about US$ 87 million). This financing from the IMF will continue to help the authorities to implement their development policies, maintain macroeconomic stability and support economic recovery in the context of the pandemic and rising inflation.

Performance under the Fund-supported program has been satisfactory. All performance criteria were met, and program-supported structural reforms are advancing. A new public financial management (PFM) medium-term strategy and action plan are in place, a new anti-corruption law has been adopted, and good progress is being made towards publication of a decree on conflict of interests.

Fiscal policy will need to maintain the delicate balance between supporting a robust economic recovery while safeguarding debt sustainability. Part of the oil revenue windfalls should finance increased social assistance and tax deferrals initiated during the pandemic to help vulnerable businesses and households cope with high inflation.

Progress in procurement and management of debt and public finances, including public investment, remains essential to avoiding accumulation of domestic and external arrears and improving spending efficiency and quality. Debt management reforms, coupled with implementation of the new anti-corruption architecture, could also help cement recent gains in governance and transparency.

Policies under this ECF-supported program will continue to help reduce fragilities and place the Republic of Congo onto a path of higher, more resilient, and inclusive growth. It will also contribute to the regional effort to preserve external stability for the Central African Economic and Monetary Union (CEMAC).

At the conclusion of the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, made the following statement:

“The Republic of Congo’s recovery is gaining momentum but remains fragile amid the on-going COVID-19 pandemic and ripple effects from the war in Ukraine, particularly due to the rapidly rising food prices. The recovery is driven by improved oil revenues, while the non-oil sector faces headwinds from inflationary pressures. Risks to the outlook remain significant, including from lower oil prices and production, new pandemic waves, weak reform implementation, and climate shocks.

“Program performance has been satisfactory. All performance criteria were met and program-supported structural reforms are advancing. The authorities remain committed to pursuing a recovery that reduces fragilities and results in higher, more resilient, and inclusive growth.

“Fiscal policy aims at ensuring an appropriate balance between supporting the post-pandemic economic recovery, addressing repercussions of the war in Ukraine, containing inflationary pressures, and safeguarding debt sustainability. To this end, part of the oil revenue windfalls will finance arrears payments and increased social spending, and part will be saved to boost fiscal buffers and CEMAC regional reserves. It will also be paramount to implement the authorities’ revenue mobilization strategy, better prioritize public investment projects, strengthen cash management, and improve debt management. Public-sector liability management operations, including refinancing of external debt, should be consistent with debt sustainability.

“The authorities are encouraged to persevere in their ambitious structural reform agenda which, combined with the fiscal policies outlined above, will be key to unlocking financing from development partners as well as achieving private sector-led economic diversification. Priority reform areas include public financial management, governance, transparency, and financial inclusion. In the current environment, it would be particularly important to ensure oil revenues are managed transparently and to continue energy sector reforms.”