Press Release No. 23/470

IMF Executive Board Completes the Fourth Review of the Extended Credit Facility Arrangement and Approves US$43 million disbursement for the Republic of Congo

December 20, 2023

• The IMF Executive Board completed the fourth review under the Extended Credit Facility, allowing for an immediate disbursement of SDR 32.4 million (about US$ 43 million).
• Economic recovery gained momentum amid challenges from inflationary pressure and an uncertain global environment. Program performance was broadly satisfactory, but structural reforms experienced delays.
• Sustained reform implementation spanning public financial and debt management, governance, and transparency will be critical to attaining higher, more resilient, and inclusive growth.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the fourth review of the Republic of Congo’s arrangement under the 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 259.2 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 inflation, including food, volatile oil prices and tightening financial conditions.

Program performance was broadly satisfactory, but structural reforms experienced delays. The authorities addressed the breach of performance criteria related to the fiscal position and debt service management, for which waivers for non-observance were granted, with strong corrective actions. Two reform benchmarks aiming for more transparency, higher fiscal revenues, and improved public investment management have been completed with delay, while efforts are being made to prop up better execution of social spending.

Fiscal policy remains focused on reducing fragilities while enhancing debt sustainability. Recent progress in fuel subsidy reform and the authorities’ commitment to pursue fiscal consolidation in 2024 are commendable. Resources freed from reduced oil-related transfers, together with improved domestic revenue mobilization, will help accelerate development spending and increase social expenditures targeted at vulnerable groups.

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, supported by higher oil revenues, robust non-oil growth and gradual reform implementation. However, substantial risks–including from potential escalation of regional conflicts, climate shocks, oil price volatility, lower oil production, and slower reform implementation–remain. While inflation has picked up, global disinflation and appropriate regional monetary policy are expected to guide it back to target level. Amid the uncertain global environment, the authorities reiterated their commitment to pursuing higher, more resilient, and inclusive growth while maintaining macroeconomic stability and debt sustainability.

“Program performance was broadly satisfactory. Most end-June 2023 quantitative performance criteria were met. However, the end-June performance criterion on the non-oil primary balance was narrowly missed, and the continuous zero ceiling performance criterion on new external arrears was breached by instances of delayed debt service. Progress in advancing structural reforms has also continued, albeit with some delays. Strong corrective actions have been taken to strengthen program performance.

“The authorities are encouraged to continue advancing fiscal consolidation, while stepping up social and development spending. Key measures include continued streamlining of fuel subsidies coupled with enhanced social assistance targeted to the vulnerable, broadening of the tax base, and stepped-up collection of tax arrears. Improving execution of social spending is paramount.

“Strengthened management of public finances and debt will also be critical to ensure debt sustainability, avoid accumulation of new arrears, and improve the effectiveness of public spending. Finalizing the reorganization of the debt management office, improving information sharing and coordination on issues with debt service, and increasing transparency on public debt will be key.

“Much-needed economic diversification, founded in private investment, will hinge on deepening structural and governance reforms. In that context, improving transparency of public finances and the oil sector, further operationalizing the anti-corruption architecture, including improvements to the AML/CFT framework, will be pivotal. Raising financial inclusiveness, ensuring steadfast implementation of state-owned enterprise reforms, and adapting to risks emanating from climate change will also support inclusive and resilient growth.”