The IMF team reached staff-level agreement on the third review of the authorities’ economic reform program supported by the Extended Credit Facility (ECF) arrangement; Despite recurrent external shocks and increasing inflation, the post-covid recovery continues to build momentum, with 2022 growth expected at 6.6 percent; Amidst high uncertainty, prudent policies to bring down inflation, strengthen fiscal and foreign exchange buffers, and advance the structural reform agenda will reinforce macroeconomic stability and enhance resilience.

Following the October 19-November 2, 2022, visit to Kinshasa, an International Monetary Fund (IMF) team, led by Mercedes Vera Martin, Mission Chief for the Democratic Republic of the Congo, finalized discussions from Washington DC on the authorities’ policies and reform program. At the conclusion of these discussions, Ms. Vera Martin issued the following statement:

“Following productive discussions, the Congolese authorities and the IMF team reached staff-level agreement on policies for the completion of the third review under the ECF arrangement. The agreement is subject to approval by IMF management and consideration by the Executive Board, which is expected in December 2022. Completion of the review will make SDR152.3 million (about US$200 million) available for balance-of-payment support.

“Real GDP is showing resilience, with growth forecasted at 6.6 percent in 2022 supported by higher-than-projected mining production. Inflation is expected to exceed 12 percent by end-2022, due to higher global food and fuel prices exacerbated by the war in Ukraine and supply chain bottlenecks. The current account reached a surplus in the first half of the year driven by strong exports, and as of end-October, gross international reserves have reached about 2 months of imports, well-above the objective at the beginning of the ECF arrangement. The domestic fiscal balance (cash basis) is projected at 1.1 percent of GDP, in line with program commitments, despite unanticipated spending pressures raising from the escalating conflict in the East, increased outlays in ministries and public institutions, and arrears repayment to fuel distributors, funded by higher unexpected fiscal revenues, due to favorable mining developments.

“The outlook remains positive. Staff projects growth at 6.3 percent in 2023 amid domestic policy tightening and a global slowdown that are likely to also weigh on growth. The medium-term outlook remains favorable, supported by expanding mining production and proactive reform efforts. In a context of fragility, the economy remains highly vulnerable to shocks; volatile international commodity prices, tighter external financing conditions, higher inflation, global slowdown in growth, and the conflict in the East have created a challenging backdrop for economic policy making. The authorities need to remain vigilant and sustain reform efforts to address structural obstacles to growth.

“The fiscal engagements under the ECF arrangement target a domestic fiscal deficit of 0.7 percent of GDP in 2023. Sustained revenue mobilization efforts and contained current spending for administration, fuel subsidies, and the wage bill will provide space for additional social spending and domestic arrears clearance. Unanticipated revenues, if any, will help build fiscal buffers to respond to shocks. Public financial management reforms remain key to enhance the quality, execution, and control of spending, including by improving the budget process and credibility, enhancing fiscal transparency and accountability; establishing the single treasury account; strengthening the public procurement system; and reinforcing the expenditure chain. Reforms on public investment management will help develop absorption capacity and improve efficiency.

“Proactive monetary policy will help anchor inflation, while continued reserve accumulation is needed given recurrent external shocks. Reforms to strengthen the monetary policy framework and central bank governance will improve liquidity management and monetary policy effectiveness. Following the approval of the draft commercial banking law, an ambitious financial reform agenda to enhance the banking regulation, supervision, and resolution frameworks will help bolster the resilience of the banking sector.

“Structural and governance reforms remain critical for economic diversification and private sector-led growth. Enhancing the anti-corruption and AML/CFT frameworks, simplifying the tax system, sustaining transparency in the mining sector (including by publishing all new and renegotiated mining contracts) and completing efforts to publish beneficial ownership information for awarded government contracts will improve the business climate and mobilize investment.

“In the context of the ECF, the Congolese government has also requested financing under the newly created Resilience and Sustainability Facility aimed at providing long-term financing to help build resilience, including against climate change. Discussions under this facility will start in the coming months.

“We would like to thank the authorities and their technical teams for the candid and constructive discussions and look forward to continuing our engagement in support of the DRC and its people.”