Press Release No. 24/269

IMF Executive Board Concludes the 2024 Article IV Consultation and the Fifth Review of the Extended Credit Facility Arrangement and Approves US$ 43 million Disbursement for the Republic of Congo

July 11, 2024

• The IMF Executive Board completed the fifth review of the Arrangement under the Extended Credit Facility, allowing for an immediate disbursement of SDR 32.4 million (about US$ 43 million)
• Economic recovery continued amid challenges from inflationary pressures and an uncertain global environment. Program performance was broadly satisfactory, but structural reforms continued to experience 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) concluded today the Article IV consultation with the Republic of Congo and the fifth 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 Arrangement to SDR 291.6 million. This financing from the IMF will continue to help the authorities implement their development policies, maintain macroeconomic stability, and strengthen economic recovery amid inflationary pressures and tighter financial conditions.

Program performance was broadly satisfactory, but structural reforms continue to experience delays. The authorities addressed the breach of performance criteria related to external debt service, for which a waiver for non-observance was granted, given the minor nature of the breach and the corrective actions taken, including the completion of the reorganization of the debt management office. Reform benchmarks aiming for more transparency, improved debt management, and the protection of public resources have been completed, albeit with delay for some of them, while efforts to ensure faster execution of social spending need to be stepped up.

Fiscal policy is focused on reducing fragilities while enhancing debt sustainability. Spending reductions tightened the fiscal deficit more than anticipated in 2023, but critical social spending and public sector investments are projected to return to previous levels in 2024.

Sustained structural reform implementation is needed to continue with the progress made so far. 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.

Congo’s economic recovery continues at a moderated pace. Growth is expected to pick up over the next two years, approaching subsequently a range of 3.5 to 3.8 percent, while inflation will return from currently elevated levels to the region’s 3 percent target. The country’s current account surplus is projected to continue declining, before turning negative, partly reflecting the projected decline in oil prices. 

The implementation of policies and reforms 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. Bo Li, Deputy Managing Director and Acting Chair, made the following statement:

“The Republic of Congo’s recovery has continued at moderated speed, supported by robust but softer non-hydrocarbon growth and gradual reform implementation. Risks point to the downside, including from potential escalation of conflicts around the globe, climate shocks, oil price volatility, tighter external financial conditions, and slower reform implementation. With global disinflation and the appropriate regional monetary policy stance, inflation is expected to ease back from its currently elevated level to the regional target of 3 percent. Amid global uncertainties, the authorities reiterated their commitment to implementing policies and reforms conducive to higher, more resilient, and inclusive growth while maintaining macroeconomic stability and debt sustainability.

“Program performance was broadly satisfactory. All end-December 2023 quantitative performance criteria were met, but the continuous zero ceiling performance criterion on new external arrears was breached by instances of delayed debt service. Progress in advancing structural reforms has continued, albeit with delays. Decisive corrective actions have been taken to strengthen program performance.

“The authorities are encouraged to maintain fiscal consolidation efforts. Continued spending discipline, a broadening of the tax base, and a scaling down of tax expenditures should gradually establish the fiscal space needed for stepping up social and development spending. A further streamlining of fuel subsidies coupled with enhanced social assistance targeted to the vulnerable are important expenditure reforms to achieve this goal. 

“Strengthened management of public finances and debt is essential for ensuring debt sustainability, avoiding accumulation of new arrears, and improving the effectiveness of public spending. Further enhancing information sharing and coordination among government agencies on issues related to 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 hydrocarbon sector, and further operationalizing the anti-corruption architecture, including improvements to the AML/CFT framework, would be pivotal. Raising financial inclusion, ensuring steadfast implementation of state-owned enterprise reforms, and adapting to risks emanating from climate change will also support inclusive and resilient growth, in particular over the medium term.”