IMF Staff Concludes Visit to the Democratic Republic of the Congo
A staff team from the International Monetary Fund (IMF), led by Norbert Toé, visited Kinshasa from June 1 to June 8 to evaluate economic and financial developments in the Democratic Republic of the Congo (DRC) and to discuss the medium-term prospects. At the end of the visit, Mr. Toé issued the following statement:
“Since mid-2015, the DRC has been hit by negative shocks stemming mainly from falling prices for its main export commodities but has been able to preserve its hard-won macroeconomic stability. In 2015 the economy grew by 6.9 percent, inflation remained low at 1.0 percent, and the exchange rate was stable. However, the difficult external environment, coupled with uncertainties related to the domestic environment, continued to weigh on the economy in 2016, impacting negatively on economic growth, public finances and the balance of payments. As a result, the increase in gross domestic product (GDP) has been revised down to 5.1 percent, inflation is forecast to rise to 1.7 percent, and the overall fiscal balance is expected to shift into deficit. The balance of payments deficit is also projected to widen in 2016 from a small deficit in 2015 and the decline in net international gross reserves to continue. The exchange rate has come under pressure during the first five months of 2016, leading to a depreciation of 2.9 percent and 4.4 percent in the official and parallel markets, respectively.
“The Congolese authorities are implementing a package of measures to maintain macroeconomic and financial stability. They have submitted a revised budget to the National Assembly that will reduce expenditures by 22 percent relative to the initial budget adopted in December 2015. The package also includes measures to mobilize domestic resources, including tax revenues, growth-enhancing spending to be financed through tapping the domestic debt market, and improve the business and investment climate. The authorities are also taking steps to moderate pressures on the exchange rate with the objective of containing the depreciation of the currency.
“Going forward, the economy is expected to continue to face headwinds, notably slow growth in advanced and emerging-market economies, tightening external financial conditions, and a difficult domestic environment. With only a modest projected recovery in commodity prices, economic growth is projected to recover gradually over the medium term while inflation is expected to accelerate, but contained below 5 percent per annum.
“Consistent with the 2015 Article IV policy recommendations, which have taken an added urgency, the team recommended allowing a larger adjustment in the exchange rate, supported by effective monetary policies to lessen the impact on inflation. At the same time, the team commended the authorities for reaffirming their commitment to the fiscal anchor of not resorting to central bank financing of government deficits. The team also commended the authorities for intensifying their efforts to diversify the economy away from the mining sector and reduce its excessive reliance on the sector to accelerate economic growth. The team stressed the importance of adopting a comprehensive reform program to help the Congolese economy weather the impact of the headwinds.
“Based on the team’s findings, the IMF will prepare an assessment letter required by some international financial institutions as they consider providing financial assistance to the DRC.
“The IMF staff team met with the Prime Minister Augustin Matata Ponyo Mapon, the Minister of State for Budget Michel Bongongo, the Minister of Finance Henri Yav Mulang, the Governor of the Central Bank of Congo Déogratias Mutombo Mwana Nyembo, and the Chief of Staff of the President, Néhémie Mwilanya. The team also met with other senior government officials, representatives of the private sector, and development partners.
“The mission thanks the DRC authorities for the fruitful discussions and their warm hospitality.”
Distributed by APO Group on behalf of International Monetary Fund (IMF).