IMF Executive Board Approves US$448.6 Million Arrangement Under the Extended Credit Facility (ECF) for the Republic of Congo

IMF Executive Board Approves US$448.6 Million Arrangement Under the Extended Credit Facility (ECF) for the Republic of Congo







July 11, 2019











  • Executive Board decision allows an immediate disbursement of SDR32.4 million (about US$44.9 million) to the Republic of Congo.
  • The Republic of Congo’s ECF program supports the authorities’ efforts to restore fiscal sustainability and rebuild regional reserves while improving governance and protecting vulnerable groups.
  • The Congolese authorities have stepped up efforts in 2018 and 2019 to address the economic crisis and the associated governance challenges.





On July 11, 2019, the Executive Board of the International Monetary Fund
(IMF) approved a three-year arrangement under its Extended
Credit Facility (ECF) with the Republic of Congo for SDR324 million (about
US$448.6 million, or 200 percent of the Republic of Congo’s quota in the
Fund) to support the country’s economic and financial reform program.

The ECF-supported program aims to help the Republic of Congo restore
macroeconomic stability, including debt sustainability, and lay the
foundations for higher and more inclusive growth. It also seeks to improve
governance to achieve greater efficiency and transparency in the management
of public resources, especially in the oil sector. The Fund-supported
program will contribute positively to the regional strategy and stability
efforts of the Central African Economic and Monetary Union (CEMAC).

The IMF Executive Board decision enables an immediate disbursement of
SDR32.40 million, about US$44.9 million. Disbursements of the remaining
amount will be phased in over the duration of the program, subject to
semi-annual reviews of the Fund-supported program by the Executive Board.

Following the Executive Board discussion on the Republic of Congo, Mr.
Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, stated:

“The Republic of Congo was hit hard by the oil price shock and delayed
fiscal adjustment, amidst governance challenges and unsustainable debt. The
shock eroded fiscal and external buffers and triggered a deep recession. To
address these challenges, the Fund-supported program focuses on (i) fiscal
consolidation and debt restructuring; (ii) strengthening human capital,
including through measures that protect vulnerable groups; and (iii)
structural reforms, with a strong focus on governance, to promote economic
diversification and achieve more inclusive growth.

“The authorities have started to implement an ambitious program of fiscal
consolidation and structural reforms. Domestic revenue mobilization will be
a key pillar of the strategy; the authorities should continue to implement
the measures included in their 2019 budget, with a focus on broadening the
tax base and strengthening compliance, while protecting social spending for
education, health, and vulnerable groups, including women’s programs. It
will also be critical to increase the transparency of public finances,
improve public investment efficiency, and eliminate off-budget spending.

“The recent agreement to restructure the Republic of Congo’s bilateral debt
should be accompanied by continued good faith efforts to restructure
commercial debt to continue to ensure the country’s debt sustainability.

“The authorities have implemented an ambitious package of reforms to
improve governance. Additional reforms will be needed to strengthen the
rule of law and the AML/CFT framework and operationalize the newly created
anti-corruption commission.

“The Republic of Congo’s medium-term outlook is subject to risks stemming
from oil price volatility, possibly uneven policy implementation and weaker
security conditions. However, the authorities have already taken decisive
steps to improve their fiscal position and have demonstrated a recent track
record of implementation of structural reforms. Program risks should be
manageable provided the authorities continue to pursue prudent policies.

“The program is supported by union-level efforts to maintain an appropriate
monetary policy stance, build-up regional reserves, and promote financial
sector stability.”

Annex

Recent Economic Developments

The Republic of Congo has been suffering one of its worst economic crises
in recent years. The crisis was triggered by the sharp decline in oil
prices since 2014 and delays in the implementation of an effective policy
response. It has resulted in an economic recession, large fiscal and
current account deficits, unsustainable debt, an accumulation of a large
stock of domestic arrears and an erosion in confidence associated with weak
governance.

In this context, the authorities took decisive policy action in 2018 and
2019. They approved prudent budgets for 2018 and 2019, initiated the
execution of a rigorous fiscal consolidation program, and implemented an
ambitious structural reform agenda with a strong focus on improvements in
governance. They also stepped-up efforts to finalize an agreement to
restructure the Republic of Congo’s bilateral debt with China, which
represents a decisive step to restore debt sustainability.

Program Summary

The ECF-supported program for the Republic of Congo aims at restoring
fiscal sustainability through strong fiscal consolidation and debt
restructuring efforts; improving governance (including PFM) to promote a
more efficient use of public resources and protecting vulnerable groups
from the burden of adjustment. The program also aims to support regional
stabilization efforts.

It is expected that Fund support would help catalyze international
assistance, including through debt restructuring.

The fiscal objectives of the program will be achieved through fiscal
consolidation, strong revenue mobilization measures, and reallocation of
resources toward investment and social spending. Debt restructuring efforts
also play a key role to restore debt sustainability. In this regard, the
conclusion of a debt restructuring agreement with China must be accompanied
by further restructuring of external commercial debt, in line with the
authorities’ debt restructuring strategy. The program envisages clearance
of external arrears to official creditors by the first review of the
ECF-arrangement. It also plans the repayment of domestic arrears during the
program period to support growth and preserve financial sector stability.

While the initial response to the crisis was slow and raised issues of weak
governance and lack of transparency, recent reform efforts are heading in
the right direction. Over the last year alone, the authorities have
implemented a large package of reforms to improve governance and
transparency.

Program implementation remains subject to significant risks, including
volatility in oil prices, and possible difficulties to sustain reform
efforts over time. However, these risks are mitigated by strong political
commitment to the program, at the highest political level, as demonstrated
by all the reforms the authorities have implemented prior to the program
approval.

Background

The Republic of Congo, which became member of the IMF on July 10, 1963, has
an IMF quota of SDR162 million.

For additional information on the IMF and the Republic of Congo, see:


https://www.imf.org/en/Countries/COG


Republic of Congo: Selected Economic and Financial
Indicators, 2016–23

2016

2017

2018

2019

2020

2021

2022

2023

Prel.

Proj.

Proj.

Proj.

Proj.

Proj.

(Annual percentage change unless otherwise specified)

Production and prices

GDP at constant prices

-2.8

-1.8

1.6

5.4

1.6

1.9

0.1

1.3

Oil

-1.5

15.3

23.9

15.8

-0.3

-1.6

-8.8

-6.1

Non-oil

-3.2

-6.2

-5.5

1.0

2.5

3.6

4.0

4.1

GDP at current prices

-8.7

12.4

24.8

0.8

0.8

0.5

-2.7

0.3

GDP deflator

-6.1

14.4

22.9

-4.3

-0.8

-1.4

-2.8

-1.0

Consumer prices (period average)

3.2

0.4

1.2

1.5

1.8

2.6

2.8

3.0

Consumer prices (end of period)

0.0

1.8

0.9

2.0

2.5

2.7

3.0

3.0

External sector

Exports, f.o.b.

-6.7

38.2

44.6

0.7

-1.8

-2.5

-7.2

-2.6

Imports, f.o.b.

11.2

-43.2

5.0

2.2

3.1

3.8

1.1

0.3

Export volume

-14.5

29.1

28.4

14.6

-1.0

-1.9

-9.7

-7.4

Import volume

0.1

-37.6

5.9

5.6

1.2

2.5

0.6

-0.5

Terms of trade (deterioration – )

-5.5

9.6

13.4

-8.9

-2.7

-2.0

2.4

4.4

Current account balance (percent of GDP)

-63.5

-5.9

6.7

5.6

5.1

1.6

-1.4

-1.9

Net foreign assets

-69.1

-54.2

12.3

57.5

69.1

41.0

9.1

7.4

External public debt (percent of GDP)

91.4

80.0

61.3

58.1

56.6

55.5

54.2

52

Monetary sector

Broad money

-15.4

-10.4

-4.0

7.5

9.4

12.2

3.4

2.7

Credit to the private sector

7.1

-5.4

-2.7

2.6

4.8

6.8

7.5

7.8

Credit to private sector (percent of non-oil GDP)

42.6

45.0

44.6

44.8

45.0

45.2

45.4

45.5

(Percent of GDP)

Investment and saving

Gross national saving

-7.0

23.9

23.8

26.4

27.7

26.1

25.7

27.2

Public

9.8

1.6

9.2

12.7

13.7

14.2

15.0

14.7

Private

-16.8

22.3

14.6

13.7

14.0

11.9

10.7

12.5

Gross investment

56.5

29.8

17.1

20.9

22.6

24.5

27.1

29.1

Public

15.5

7.9

2.2

4.5

5.4

6.0

6.5

6.8

Private

41.0

21.9

14.9

16.4

17.2

18.5

20.3

22.1

(Percent of non-oil GDP, unless otherwise indicated)

Central government finances

Total revenue

54.1

53.6

74.2

78.7

77.7

74.8

71.2

67.5

Oil revenue

24.1

25.2

50.6

48.3

43.8

40.7

35.9

32.0

Nonoil revenue (including grants)

28.6

28.4

23.6

30.4

33.9

34.1

35.3

35.5

Total expenditure and net lending

85.9

67.8

57.4

59.8

59.2

57.4

54.8

53.3

Current

46.8

48.4

51.9

48.5

46.1

43.7

41.2

40.1

Capital (and net lending)

30.2

15.2

5.5

11.3

13.1

13.7

13.5

13.2

Off-budget

8.9

4.3

0.0

0.0

0.0

0.0

0.0

0.0

Overall balance (deficit -, payment order basis, percent of
GDP)

-20.1

-7.4

6.6

7.5

7.6

7.6

7.9

7.3

Non-oil primary balance (- = deficit)

-51.7

-35.3

-28.1

-24.8

-21.6

-20.1

-16.9

-15.9

Basic primary fiscal balance (- = deficit)1

-18.3

-1.9

24.8

23.4

22.2

20.6

19.0

16.1

Reference fiscal balance (percent of GDP)2

-1.5

-0.7

-4.7

-0.8

2.6

4.9

5.7

5.2

Primary balance (percent of GDP)

-17.4

-5.2

8.9

9.3

9.2

9.0

9.1

8.3

Financing gap (CFAF billion)3

0.0

0.0

0.0

362

411

245

66

-35

Total public debt (percent of GDP)

118.6

117.5

87.8

81.7

76.6

71.6

66.8

60.7

External public debt service

23.4

24.0

24.6

37.6

32.0

22.8

18.9

12.5

External public debt

275.5

293.4

210.9

187.6

178.9

172.0

160.8

151.0

(Billions of CFA francs, unless otherwise indicated)

Nominal GDP

4,616

5,189

6,476

6,529

6,578

6,611

6,432

6,449

Nominal oil GDP

1,708

2,493

3,932

3,926

3,863

3,723

3,343

3,133

Nominal non-oil GDP

2,908

2,695

2,544

2,603

2,715

2,888

3,089

3,316

Nominal GDP in US$ (millions)

7,787

8,932

11,664

11,382

11,592

11,715

11,472

11,532

World oil price (U.S. dollars per barrel)

43

53

68

59

59

58

58

58

Oil production (Millions of barrels)

85

98

121

140

140

137

125

118

Nominal Exchange rate (CFA/USD, period average)

592.8

580.9

555.2

REER (percentage change)

4.1

0.5

1.2

Sources: Congolese authorities; and IMF staff estimates and
projections.

1
Revenue excluding grants minus total expenditures
(excluding interest payments and foreign-financed public
investment).

2
Overall balance minus 20 percent of oil revenues and minus
80 percent of the oil revenue in excess of the average
observed during the three previous years.

3
Before IMF-ECF financing, other expected financing and
exceptional financing due to external debt restructuring
net of restructured contingent liabilities.


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Lucie Mboto Fouda

Phone: +1 202 623-7100Email: [email protected]

@IMFSpokesperson





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