Journal Issue

IMF Executive Board Concludes 2015 Article IV Consultation with the Democratic Republic of the Congo

International Monetary Fund. African Dept.
Published Date:
October 2015
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On September 02, 2015, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with the Democratic Republic of the Congo (DRC). DRC’s macroeconomic performance remained strong through the first half of 2015 despite a difficult external and domestic environment. Real GDP growth in 2014 is estimated at 9.2 percent, driven by copper production and the service sector. Year-on-year inflation stabilized at 1.0 percent at end-December 2014, on account of a prudent fiscal stance. The fiscal position recorded a small surplus, in line with the fiscal anchor adopted in 2009. The external current account deficit narrowed to 9.2 percent of GDP in 2014 from10.6 percent of GDP in 2013, reflecting an improvement in the terms of trade and strong exports of mining products. Sustained inflows of foreign direct investments contributed to an overall balance of payments surplus, despite decreasing official transfers. Nonetheless, international reserves fell in U.S. dollar terms, stabilizing at 6.2 weeks of imports at end-2014. Although the real exchange rate declined somewhat, competitiveness is hampered by structural bottlenecks, including a challenging business climate and electricity shortages, which weigh on the efforts to diversify the economy and promote inclusive growth. Furthermore, the financial position of the Central Bank of Congo (BCC) remained fragile, undermining the conduct of monetary policy.

The medium-term outlook is favorable but subject to downside risks. Real GDP growth is projected to remain strong at 9.2 percent in 2015—among the highest rates in the world—and average 8.4 percent in 2016–17 before stabilizing at around 6 percent in 2018–20. Inflation is targeted at 2.5 percent, as fiscal policy remains prudent. Despite a sustained projected increase in exports the current account deficit would increase to double digits by 2018 due to rising dividend outflows and imports. Nonetheless, the overall balance is expected to remain in surplus, but international reserves would remain at relatively low levels in the absence of interventions by the Central Bank of Congo.

Risks to the outlook are a prolonged decline in commodity prices, a deterioration of the political situation, and delays in implementing key revenue-raising measures. Moreover, a worsening of the energy situation would constrain the projected sustained growth in mining production.

The authorities are urged to move swiftly to meet these challenges in order to preserve the hard-won gains and address rising inequality. In particular, they need to: (i) step up domestic revenue mobilization, (ii) accumulate more international reserves; (iii) remove bottlenecks to private sector activity, and (iv) strengthen governance and enhance transparency in the management of natural resources.

Executive Board Assessment2

Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities for their prudent macroeconomic policies, which have supported robust economic growth and macroeconomic stability despite the country’s fragility and limited external financial assistance. Directors noted, however, that poverty and unemployment remain high and that stronger efforts are needed to diversify the economy, promote inclusive growth, and improve social indicators.

To bolster private sector development and facilitate economic diversification, Directors urged the authorities to improve the business and investment climate and take steps to ease political uncertainty. They emphasized that restoring lasting peace in the eastern provinces will help free government resources for spending on priority social programs, basic infrastructure, and human capital development. They also called for steps to develop the agriculture sector.

Directors supported the authorities’ prudent fiscal stance to preserve macroeconomic stability, but underscored the need to rebuild policy buffers given rising economic vulnerabilities. They called for efforts to step up domestic revenue mobilization by broadening the tax base and enhancing tax administration, and to accumulate international reserves to enhance the economy’s ability to withstand shocks. Directors also encouraged the authorities to strengthen the budgetary process to enhance its credibility, to contain spending pressures, particularly in the context of upcoming elections, and to move toward the adoption of a medium-term budget framework.

Directors called for strengthening the central bank through a timely recapitalization and passage of the Central Bank Law to enshrine its operational independence and accountability. This will enhance the credibility of the central bank and, along with prudent progress on de-dollarization, improve the effectiveness of monetary policy. Directors also supported continued progress on the rationalization of the bank’s operating costs. Directors underscored the importance of preserving financial sector stability and deepening financial intermediation to promote inclusive growth. They encouraged the central bank to enhance supervision and crisis management practices, reinforce the implementation of the regulatory framework with effective on-site inspections, and develop the financial infrastructure. Directors noted that addressing solvency problems in the microfinance sector would improve access to financing by small and medium enterprises.

Directors welcomed the country’s accession to full compliance status with the Extractive Industries Transparency Initiative. They encouraged the authorities to further improve transparency and governance in the natural resource sector and strengthen their oversight of state-owned enterprises by ensuring that they publish contracts of all mining operations and sell natural resource assets through competitive bidding. In this regard, Directors emphasized that the enactment of a new mining code in line with international best practices should bolster the contribution of the mineral sector to government revenue, and help mobilize resources toward development needs.

Directors commended the authorities for their efforts to provide data for surveillance and encouraged them to allocate more resources to statistics to leverage the capacity-building assistance provided by the Fund and development partners. It is expected that the next Article IV consultation with the Democratic Republic of the Congo will be held on the standard 12-month cycle.

Democratic Republic of the Congo: Selected Economic and Financial Indicators, 2012–20
(Annual percentage change; unless otherwise indicated)
GDP and prices
Real GDP7.
GDP deflator4.
Consumer prices, period average2.
Consumer prices, end-of-period2.
External sector
Exports, f.o.b. (U.S. dollars)−9.514.
Imports, f.o.b. (U.S. dollars)−−3.06.314.512.811.011.2
Export volume−3.422.810.110.612.
Import volume−10.810.726.911.55.411.610.89.49.5
Terms of trade−5.6−−0.8−
Money and credit(Annual change; percent of beginning-of-period broad money)
Broad money21.
Net foreign assets22.
Net domestic assets−1.915.711.36.6
Domestic credit−4.614.514.92.1
Of which:
Net credit to government (annual percent change)−−7.3
Credit to the private sector (annual percent change)25.626.522.720.1
Central government finance(Percent of GDP; unless otherwise indicated)
Revenue and Grants17.215.314.616.116.816.616.817.117.4
Overall balance (including grants)−0.10.1−0.2−0.3
Investment and saving
Gross national saving5.
Balance of payments
Exports of goods and services35.632.334.332.834.033.133.934.734.6
Imports of goods and services40.038.041.837.336.437.438.338.839.8
Current account balance, incl. transfers−6.9−10.6−9.2−7.5−7.7−9.4−10.1−10.1−11.2
Current account balance, excl. transfers−9.8−14.0−13.8−11.3−9.5−11.1−11.6−11.6−12.6
Overall balance2.
Gross official reserves (weeks of non-aid-related imports of goods and services)
(Percent of GDP)
External public debt
Total stock, including IMF16.613.611.513.514.416.518.820.221.7
Present value (PV) of debt19.413.515.211.012.513.915.416.016.7
PV of debt (percent of exports of goods and services)54.341.944.233.636.942.145.646.348.5
Exchange rate, (CDF per U.S. dollar)
Period average919920925
Memorandum item:
Scheduled debt service181.7194.689.0223.7245.4354.9317.2293.8286.6
Percent of exports of goods and services1.
Percent of government revenue4.
Gross official reserves (end-of-period, millions of U.S. dollars)1,6451,6951,5771,5341,4821,4181,3941,3441,305
Nominal GDP (CDF billions)25,34430,05133,22437,05640,77445,21049,81854,49358,931
Nominal GDP (U.S$ million)27,56632,67635,91839,98243,66547,93752,30056,64260,648
Sources: Congolese authorities; and IMF staff estimates and projections.

The projections for 2011 and beyond account for mining companies profit outflows.

Projections are based on calculations under the 2010 HIPC Debt Sustainability Analysis. Includes assistance beyond the terms of the enhanced HIPC Initiative granted by some Paris Club creditors. Exports are a trailing three-year moving average.

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

The projections for 2011 and beyond account for mining companies profit outflows.

Projections are based on calculations under the 2010 HIPC Debt Sustainability Analysis. Includes assistance beyond the terms of the enhanced HIPC Initiative granted by some Paris Club creditors. Exports are a trailing three-year moving average.

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here:

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