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International Monetary Fund

Macroeconomic developments in the Central African Economic and Monetary Community (CEMAC) region have been satisfactory, but risks to macroeconomic stability persist. The process of convergence remains slow and needs strengthening, notably through the adoption of a fiscal rule and the elimination of bank financing of fiscal deficits. Continued efforts by the banking regulator are needed to strengthen the banking sector. There is a need to accelerate structural reforms, strengthen basic infrastructure, and adopt common sectoral policies aimed at diversifying the regional economy.

International Monetary Fund. External Relations Dept.

Brazil’s announcement in March 2005 that it would not renew its borrowing arrangement with the IMF marks an important milestone in what has been a remarkable economic journey. After its recovery from a crisis in 1999, Brazil once again faced turbulent market conditions in 2002, when investors—nervous after Argentina’s default on its public debt the year before, and unsure what to make of presidential candidate Luiz Indáio Lula da Silva—began selling off Brazilian debt. A loan of unprecedented size, agreed to with the IMF at great speed in September 2002, shortly before Lula’s electoral victory, helped Brazil weather the storm. Since then, the economy has mounted a strong recovery, with sustained growth in prospect. Camilla Andersen of the IMF Survey spoke with Charles Collyns and David Owen of the IMF’s Western Hemisphere Department.

International Monetary Fund

This paper discusses a Request from Congo for a Three-Year Arrangement Under the Poverty Reduction and Growth Facility (PRGF) program. Growth in Congo in 2008 was strong, but weakened by the onset of the global financial crisis during the second half of the year that resulted in a deterioration of the country’s terms of trade and large job losses in the mining sector. Macroeconomic policies for the rest of 2009 and 2010 aim at reducing inflation while mitigating the impact of the global financial sector on the economy.

International Monetary Fund

This 2007 Article IV Consultation highlights that the Democratic Republic of the Congo (DRC) has made significant economic and political progress since 2001, after years of conflict and political instability. Adoption of prudent macroeconomic policies resulted in rapid disinflation and the stabilization of the exchange rate. The implementation of structural reforms made the economy more open, removed major price distortions, and strengthened macroeconomic policy management. Executive Directors have encouraged the new government to work with all parties to improve security and bring peace to all country provinces.

Michael Nowak and Mr. Anthony R. Boote

This 2005 Article IV Consultation highlights that the economic activity in the Democratic Republic of the Congo (DRC) started to recover in 2002, after declining for 13 years. Inflation declined from 511 percent at end-2000 to 4 percent at end-2003. Fiscal developments were mixed in 2004, with government revenue higher and expenditure lower than programmed. The main risks for the rest of 2005 relate to security and social tensions, which could worsen in the case of further delays in the transition process.

International Monetary Fund. African Dept.

KEY ISSUESContext and outlook: Despite strong macroeconomic performance under the Fund- supported program (2009�12) with economic activity steadily accelerating and inflation declining sharply, poverty remains pervasive and the economy vulnerable, exposing this progress to reversal. Limited fiscal space and shocks to revenues often offset by expenditure adjustments have not supported pro-poor and critical investment spending necessary for inclusive growth, giving rise to mounting social demands to share in the benefits of the accelerating growth.Focus of consultation: The discussions focused on medium-term policy measures to preserve macroeconomic stability while promoting inclusive growth, improve transparency and good governance in the natural resources sector; and foster financial stability and development.Key policy recommendations:� Maintain the fiscal anchor of no (net) central bank financing of the budget while creating fiscal space through enhanced domestic revenue mobilization, and improving the quality of public spending through public financial management (PFM) reforms, and building more robust buffers against external shocks.� Implement measures included in the updated governance matrix agreed with the World Bank and the recommendations of the Extractive Industries Transparency Initiative (EITI) and the National Conference on Mineral Resources Management (NCMRM) to enhance transparency and good governance in the management of natural resources.� Accelerate reforms of the Central Bank of the Congo (BCC) and the financial sector by (i) passing the central bank law to strengthen its independence and governance,(ii) completing its recapitalization, and (iii) strengthening its analytical capacity,(iv) disengaging from non-core activities, and (v) implement FSAP recommendations to promote financial sector stability and development.

Mr. Tetsuya Konuki and Mr. Mauricio Villafuerte
Excessively procyclical fiscal policy can be harmful. This paper investigates to what extent the fiscal policies of sub-Saharan African countries were procyclical in recent years and the reasons for the degree of fiscal procyclicality among these countries. It finds that a tendency for procyclical fiscal policy was particularly pronounced among oil exporters and after the global financial crisis. It also finds a statistically significant causal link running from deeper financial markets and higher reserves coverage to lower fiscal policy procyclicality. Fiscal rules supported by strong political commitment and institutions seem to be key to facilitating progress for deeper financial markets and stronger reserves coverage.