Press Release No. 23/270

IMF Executive Board Completes the Third Review of the Extended Credit Facility Arrangement for the Republic of Congo and Approves US$43 Million Disbursement

July 19, 2023

• The IMF Executive Board completed the third review under the Extended Credit Facility, allowing for an immediate disbursement of SDR 32.4 million (about US$ 43 million)
• Strengthened economic recovery remains fragile amid moderating oil prices and an uncertain global environment.
• Some progress has been achieved on structural reforms, but sustained efforts to step up reform implementation in public financial and debt management, governance, and transparency will be critical to attaining higher, more resilient, and inclusive growth. Continued energy sector reforms remain particularly essential.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the third review of the Republic of Congo’s economic program under the SDR 324 million Extended Credit Facility (ECF), which was approved on January 21, 2022. The completion of the review allows for the immediate disbursement of SDR 32.4 million (about US$ 43 million), bringing total disbursements under the ECF to SDR 226.8 million. This financing from the IMF will continue to help the authorities implement their development policies, maintain macroeconomic stability and strengthen economic recovery amid high food inflation, lower oil prices and tightening financial conditions.

Structural reforms continued to advance in some areas, but the program underperformed in several areas. Progresses were achieved in procurement planning, debt reporting, and efforts to increase transparency. However, three out of five performance criteria related to the fiscal position and debt service management were missed, prompting authorities to request waivers for these three criteria and take strong corrective measures. Authorities will continue to pursue two reform benchmarks aiming for additional transparency in the management of natural resources and higher fiscal revenues.

Fiscal policy will focus on reducing fragilities while maintaining debt sustainability. Development spending and payment of domestic arrears will be accelerated with the resources freed from reduced oil-related transfers in line with gradual fuel price deregulation coupled with targeted social assistance to protect the most vulnerable population. Concurrently, fiscal consolidation will be supported by revenue mobilization, including eliminating exemptions in the hydrocarbon sector.

Building on recent advances, sustained structural reform implementation is needed. Improved management of public finances especially on public investment and debt will facilitate larger, more effective, and higher quality development spending. Broader governance reforms, encompassing anti-corruption and transparency, will also be critical for improving the business environment.

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 has continued though substantial risks remain amid an uncertain global environment. Social and infrastructure spending, domestic arrears payments, and gradual reform implementation are supporting economic activity. Inflation is expected to pick up moderately before falling back to target level as easing import prices mitigate domestic energy price adjustments. Key risks to the outlook include vulnerabilities of investment and trade to potential escalation of regional conflicts around the globe, climate shocks, lower oil prices and production, and weaker reform implementation.

“Program underperformance needs to be addressed. End-December performance criteria on the non-oil primary balance and net domestic financing were missed due to increased oil-related subsidies, higher domestic spending, and larger accumulation of escrow deposits. The continuous zero ceiling performance criterion on new external arrears was breached by delayed debt service payments. Progress has been achieved in advancing structural reforms, two out of five structural benchmarks have been met on time, and one has been implemented with delay. Strong corrective actions have been taken to address underperformance. Looking ahead, steadfast implementation of reforms remains key to keep the program on track.

“The authorities re-iterated their commitment to pursuing higher, more resilient, and inclusive growth while maintaining macroeconomic stability and debt sustainability. To this end, the authorities are encouraged to pursue fiscal consolidation, while stepping up social and development spending. Key measures include the reduction of oil-related subsidies consistent with a gradual fuel price deregulation coupled with increased social assistance for the vulnerable, broadening of the tax base, and stepped-up collection of tax arrears. Strengthened management of public finances and debt will also be critical to more effective public spending.

Much-needed economic diversification, founded in private investment, will hinge on deepening structural reforms, especially further operationalizing the new anti-corruption architecture, addressing gaps in the AML/CFT framework, raising financial inclusion, and ensuring steadfast implementation of state-owned enterprise reforms. Tackling climate vulnerabilities would also be important.”