IMF staff and the authorities have reached a staff-level agreement on the first review under the three-year Extended Credit Facility (ECF) arrangement; Boosting public investment and social spending critically depends on continued efforts to raise revenues, reducing non-priority spending, and ensuring efficient and transparent use of public funds, including the SDR allocation; Authorities remain committed to building reserves to guard against external shocks, improve governance and the business climate, and enhance transparency, including in the mining sector.

An International Monetary (IMF) team, led by Ms. Mercedes Vera Martin, conducted virtual discussions (October 4-13) and meetings with the authorities in Kinshasa during October 20-27, on the first review under the three-year arrangement under the Extended Credit Facility (ECF).

At the end of the mission, Ms. Vera Martin issued the following statement:

“Following productive discussions, the Democratic Republic of Congo’s authorities and the IMF team reached a staff-level agreement on the conclusion of the First Review under the ECF arrangement subject to IMF management approval. Consideration by the IMF’s Executive Board is expected in December 2021.

“Despite the persistence of the COVID-19 pandemic, the economy is recovering; growth for 2021-22 has been revised upward to 5.4 percent and 6.2 percent respectively, supported by higher-than-envisaged mining production and a rebound in non-extractive growth. Inflation has remained anchored at about 5 percent. Better-than-envisaged external developments, supported by high commodity prices, has allowed for a significant increase in gross international reserves to $3.3 billion in mid-October 2021 (from $0.8 billion at end-2020). This reflects more proactive foreign exchange purchases by the central bank and the end-August general SDR allocation. Higher fiscal revenues have provided space for additional spending, mostly on investment, without undermining the end-2021 fiscal deficit.

“The IMF team and authorities discussed the proposed 2022 budget to secure key program objectives. In addition to realistic revenue projections, the budget envisages scaling up public investment, which will be financed to some extent by the partial use of the SDR allocation. While the capacity and governance of the institution in charge of project implementation, monitoring, and execution is being strengthened, additional safeguards to support an efficient and transparent use of funds are needed. The projected deficit, which is expected to widen, will remain in line with program objectives.

“Strengthening revenue mobilization remains a key objective that needs to be supported by continuous progress in tax reforms, including modernizing and digitalizing tax administration, enhancing tax compliance, restoring a proper functioning of the VAT system, implementing the excise duty traceability system, and streamlining tax expenditure and non-tax charges. The authorities are also committed to enhance public financial management to limit non-priority spending, including by respecting the expenditure chain, streamlining the wage bill, and limiting budgetary costs related to fuel pricing. This is crucial to create room for growth-enhancing spending in priority sectors such as health, education, and infrastructure.

“The Central Bank of Congo (BCC) has started implementing ambitious reforms strengthening its independence. The program remains anchored on avoiding reliance on central bank financing, which would help sustain low and stable inflation. In the short term, reforms will focus on regularizing the outstanding credit to the government and revising the reserve requirement framework. The BCC is also committed to strengthen safeguards and governance, including by enhancing its internal audit. The draft commercial banking law, to be submitted to Parliament by end-November, will help enhance the prudential regulatory and supervisory frameworks, and the crisis prevention and resolution formulation.

“Improving governance remains a key cornerstone of the program, with continued emphasis on strengthening the management of extractive resources; enhancing public finance transparency, accountability and efficiency; and addressing corruption and money laundering. The authorities are working on amendments to the law on anti-money laundering and the combating the financing of terrorism, to meet global standard recommendations, and to the asset declaration framework in line with the Article 99 of the Constitution.

“Advancing structural reforms is key to sustain the recovery and promote higher and more inclusive growth. The success of the program hinges on prudent macroeconomic policies, and on an improved business climate to attract private investment.

“The mission met with President of the Senate Modeste Bahati Lukwebo, Prime Minister Jean-Michel Sama Lukonde Kyenge, Minister of the State and of the Budget Aimé Boji, Minister of Finance Nicolas Kazadi, Minister of Public Enterprises Adèle Kahinda Mayina, BCC Governor Malangu Kabedi Mbuyi, other senior officials, development partners, and private sector representatives. The mission thanks the Congolese authorities for their close cooperation and open discussions.”