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The Democratic Republic of the Congo: Staff-Monitored Program and Request for Disbursement Under the Rapid Credit Facility—Debt Sustainability Analysis

Author(s):
International Monetary Fund. African Dept.
Published Date:
December 2019
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Risk of external debt distress:Moderate
Overall risk of debt distressModerate
Granularity in the risk ratingSome space to absorb shocks
Application of judgmentNo

According to the updated Low-Income Country Debt Sustainability Framework (LIC DSF), the Democratic Republic of the Congo (DRC)’s debt-carrying capacity was assessed as weak1. DRC remains at a moderate risk of external and overall debt distress, with some space to absorb shocks. The country shows some vulnerabilities in debt repayment capacity due to weak revenue mobilization. Most external debt thresholds are breached under the stress tests, highlighting the country’s vulnerability to external shocks. Given limited buffers, prudent borrowing policies are essential by prioritizing concessional loans and strengthening debt management policies.

Public Debt Coverage

1. Public and publicly-guaranteed (PPG) external and domestic debt covers debt contracted and guaranteed by the central government, the Central Bank of Congo (BCC), provinces, and part of state-owned enterprises (SOEs). The public debt department (Direction Générale de la Dette Publique, DGDP) under the Ministry of Finance publishes quarterly and annual reports on its website with information on domestic and external debt based on the residency criteria. The reports summarize the debt of the central government, debt of SICOMINES (a joint venture stemming from an agreement between the Congolese government and Chinese investors) and Gécamines, guaranteed external debt of SOEs managed by the government, provinces (only the province of Maniema is missing, out of 26 provinces), and BCC’s debt. Data on private sector’s and other public institutions’ debt are not available. Other public institutions do not have the capacity to borrow externally without a government guarantee. The authorities believe that other SOEs have not borrowed externally, however they do not receive any regular report from them. The authorities are committed to broaden the debt coverage, especially to improve SOEs debt reporting in terms of debt stock and debt service. Sicomines’ infrastructure loans have a government guarantee which can only be called after 2050. Its debt service should be repaid by 2027 and is collateralized by Sicomines’ earnings.2

Text Table 1.Democratic Republic of the Congo: Coverage of Public and Publicly Guaranteed Debt and Parameters for Contingent Liability Shocks for the Tailored Stress Test
Definition of external/domestic debtResidency-based
Is there a material difference between the two criteria?No

The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country’s public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE’s debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%.

Sources: Congolese authorities. IMF staff calculation.
Public debt coverage
Subsectors of the public sectorCheck box
1Central governmentX
2State and local governmentX
3Other elements in the general government
4o/w: Social security fund
5o/w: Extra budgetary funds (EBFs)
6Guarantees (to other entities in the public and private sector, including to SOEs)X
7Central bank (borrowed on behalf of the government)X
8Non-guaranteed SOE debtX

The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country’s public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE’s debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%.

Sources: Congolese authorities. IMF staff calculation.
Public debt coverage and the magnitude of the contingent liability tailored stress test
1The country’s coverage of public debtThe central, state, and local governments, central bank, government-guaranteed debt, non-guaranteed SOE debt
DefaultUsed for the analysisReasons for deviations from the default settings
2Other elements of the general government not captured in 1.0 percent of GDP2Some public institutions are not reporting to the DGDP.
3SoE’s debt (guaranteed and not guaranteed by the government)1/2 percent of GDP0.5Reflecting risks stemming from irregular data sharing with DGDP.
4PPP35 percent of PPP stock0.00
5Financial market (the default value of 5 percent of GDP is the minimum value)5 percent of GDP5
Total (2+3+4+5) (in percent of GDP)7.5

The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country’s public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE’s debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%.

Sources: Congolese authorities. IMF staff calculation.

The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country’s public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE’s debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%.

Sources: Congolese authorities. IMF staff calculation.

Background and Recent Developments

2. Despite vast natural resources, DRC is one of the poorest countries in the world, and it displays many aspects of fragility as it remains prone to health and humanitarian crises and violent conflicts. The economy is highly dollarized, undiversified, and acutely vulnerable to commodity-price shocks and supply risks. The first ever peaceful presidential transition since independence took place in January 2019. The new government is keen on reestablishing active relationships with the international community.

3. While some macroeconomic stability has been secured in recent years, the economy remains highly vulnerable to shocks. GDP growth was 5.8 percent in 2018 and is projected to be 4.5 percent in 2019, while 12-month inflation has fallen to around 5 percent and the exchange rate has stabilized. Strict budgetary discipline led to overall fiscal surpluses in 2017–18, but deficits of 2.3 and 0.6 percent of GDP are projected for 2019 and 2020, respectively. International reserves have been low, reaching less than 2 weeks of import coverage in late 2019, a critical vulnerability that needs to be tackled decisively.

Text Table 2.Democratic Republic of the Congo: External Arrears as of End-2018

External arrears are limited and date from pre-HIPC Completion Point, amounting to US$328.7 million. Four non-Paris Club creditors hold claims against the DRC for half of the total amount in arrears and are in negotiation or under reconciliation process. The remaining half are claims to commercial creditors. Amounts have been reconciled but there are cases under litigation. A 5-year schedule for the repayment of external arrears has been assumed, starting in 2021.

Democratic Republic of the Congo – External Arrears
2018
Nominal in millions of US$Percent of GDP
Est.
Total External Arrears3290.7
Bilateral creditors1640.3
Commercial creditors 1/1650.3
Memo item:
GDP47,099
Sources: Congolese authorities; IMF staff calculations

Includes Sicomines debt

Sources: Congolese authorities; IMF staff calculations

Includes Sicomines debt

4. About half of the public external debt is owed to official creditors. At end-2018, 30 percent of the debt was owed to multilateral creditors and 19 percent to bilateral official creditors, a significant increase from 4 percent in 2014 due to borrowing from non-Paris Club creditors. The share of debt owed to commercial creditors has remained stable at a third of external debt (see Text Table 3). Sicomines’ debt represents almost 40 percent of total external debt. It is assumed to be repaid over 10 and 15 years for mining and infrastructure projects, respectively.

Text Table 3.Democratic Republic of the Congo: Total Public Debt Stock, 2018
Nominal in millions of US$Percent of GDPPercent of Public DebtPercent of External Debt
Est
Total Public Debt9,47620.1100
Of which: arrears3,4037.236
Total External Debt6,40113.668100
Of which: arrears3290.735
Multilateral creditors1,9164.12030
Bilateral creditors1,2402.61319
Commercial creditors 1/3,2456.93451
Total Domestic Debt3,0746.532
Sources: Congolese authorities; IMF staff calculations

Includes Sicomines debt

Sources: Congolese authorities; IMF staff calculations

Includes Sicomines debt

5. The overall domestic debt is composed of arrears. As of 2018, total domestic debt was equivalent to US$3.1 billion, or about one third of total public debt. Reconciled legacy arrears equal US$1.9 billion, or almost 60 percent of domestic public debt. They have been audited and fall into five categories: financial debt, social debt, judiciary debt, suppliers, and rent and other services. Other legacy arrears amounting to about US$3 billion have still to be audited. According to the authorities, in the past, only 20 percent of audited arrears became validated. VAT arrears represent the second largest category of arrears with almost a quarter of the domestic debt. They are expected to be repaid against taxes due. Arrears from provinces are also included in the stock of domestic debt. Only one province did not report its stock of arrears but, according to the authorities, its amount should be marginal.

Text Table 4.Democratic Republic of the Congo: Total Stock of Domestic Debt, 2018
Nominal in US$ millionin percent of GDPin total domestic debt
Reconcilied legacy arrears1,8664.060.7
Arrears from provinces1470.34.8
Arrears to oil companies2620.68.5
VAT arrears7991.726.0
Total3,0746.5100.0
Sources: Congolese authorities; IMF staff calculations
Sources: Congolese authorities; IMF staff calculations

Underlying Assumptions

6. The medium- and long-term macroeconomic framework underlying this DSA is quite similar to the one in the 2019 Article IV. GDP growth assumptions are slightly more conservative in the next couple of years before picking up a bit due to new mining projects which would lead to a substantial increase of exports and imports in the medium term. Fiscal policy is assumed to be looser in the first couple of years of the projection period, and over the medium and longer terms. This is based on the assumptions of more ambitious public spending on infrastructure and education and the availability of additional external and domestic financing sources in the context of improved relations with international partners.

Text Table 5.Democratic Republic of the Congo: Macroeconomic Forecast and Assumptions

(comparison with 2019 Article IV DSA)

Real GDP Growth (percent change)Revenue (excluding grants) growthOverall fiscal balance (percent of GDP)Exports of goods and services growthImports of goods and services growthCurrent account balance (percent of GDP)
Previous (08/19)CurrentPrevious (08/19)CurrentPrevious (08/19)CurrentPrevious (08/19)CurrentPrevious (08/19)CurrentPrevious (08/19)Current
20156.96.92.22.3-0.4-0.4-17.2-17.2-19.1-19.1-3.8-3.8
20162.42.4-21.0-12.6-0.5-0.514.914.911.511.5-4.1-4.1
20173.73.7-10.229.71.41.4-3.0-3.0-8.3-8.3-3.2-3.2
20185.85.833.840.20.40.038.038.036.136.1-4.6-4.6
20194.34.53.019.1-0.2-2.7-20.9-18.7-19.0-19.5-3.5-3.8
20203.93.21.620.2-0.1-0.64.3-5.45.6-0.9-4.2-4.3
20213.43.510.28.80.2-1.04.06.55.29.0-4.4-3.7
20224.54.58.512.80.2-0.57.69.26.96.8-4.3-3.2
20234.34.38.313.10.2-0.66.48.47.57.0-4.4-2.8
20244.64.68.411.90.1-0.47.47.97.97.7-4.5-2.7
avg. 2025–394.54.65.88.7-0.1-0.35.43.05.12.3-3.7-1.2
Sources: Congolese authorities and IMF staff calculations and projections.
Sources: Congolese authorities and IMF staff calculations and projections.

Box 1.Democratic Republic of the Congo: Macroeconomic Assumptions for 2019–39

Real GDP growth. GDP growth over the medium term would average more than 4 percent driven by sustained increases in mining production and a gradual recovery in investment. The newly elected President laid out his development plan that aims at supporting private sector activity, particularly in the agriculture, energy, and tourism sectors. He also plans to increase public investment, specifically in infrastructure.

Inflation. Inflation is projected to stabilize at around 5 percent, below the 7 percent target of the BCC, as the economy slowly recovers.

Primary balance. The primary fiscal balance is projected to stay close to zero percent of GDP for 2022 and later years on the basis of more prudent fiscal policies. Capital expenditure would reach 3.9 percent of GDP at the end of the projection period. It would be initially financed mostly through foreign sources, but domestic financing would increase gradually to represent about half of its financing. Revenues are computed as central government revenues plus revenue from SOEs assumed to be equivalent to their debt service flows. The latter represent an average of 4.4 percent of total revenues over the repayment period.

Current account balance. The current account balance has been stable while significantly affected by the developments in the mining sector. After a recovery in 2017, the current account deficit increased again in 2018 mainly due to capital equipment and other imports due to the presidential elections. Mineral exports constitute significant portion of exports and projected to improve, on average, over the medium term due to new mining projects, while imports are projected to rise gradually on the back of increasing demand for capital goods and intermediates for infrastructure investment. Thus, the current account deficit would average around 3 percent of GDP over the medium term.

Gross official reserves are expected to gradually rise by 2021 to about 5 weeks of imports, partly due to expatriation of BCC foreign currency deposits in local banks.

Financing assumptions. In the short-term, public debt is expected to increase to help finance the investment program of the new government, but it is expected to decrease later on. Public investment is assumed to increase gradually to more than 3.5 percent of GDP over the medium term. External financing is projected to be a mix of concessional loans and bilateral and commercial loans. Part of the financing of public investment projects would also stem from foreign grants. Additional government financing needs are assumed to be covered by treasury bonds issuance in the domestic market. The financing mix is projected to remain unchanged over the projection period as it is assumed that DRC would not be able to switch from concessional to non-concessional borrowing.

7. The realism tool’s outputs compare the DSA projections to cross-country experiences and to DRC’s own historical experience (Figures 3 and 4).

  • a. Debt drivers: Over the last 5 years DRC’s external debt has barely changed (it actually fell), in contrast to LICs’ upward PPGE debt trend. With regard to total public debt, the main driver behind its increase was the extension of debt coverage.
  • b. Fiscal adjustment and growth. The baseline scenario assumes some structural reforms in the short term to increase domestic revenue mobilization but still limited access to external financing. The baseline scenario will not be sufficient to generate inclusive and sustained growth over the medium- to long-terms.

8. DRC’s debt carrying capacity is classified as weak (Text Table 7). The classification of debt carrying capacity is guided by the composite indicator (CI) score, which is determined by the World Bank’s CPIA and other variables, such as real GDP growth, import coverage of foreign exchange reserves, remittances as percent of GDP, and growth of the world economy. The CI also incorporates forward-looking elements, with the calculation based on a 10-year average (5 recent years of historical data and 5 years of projections). DRC’s CI is 1.98 and is below the previous vintages. It can be explained by lower CPIA, which accounts for more than half of the total components of the CI index. DRC is a fragile state and highly vulnerable to external shocks. A tailored stress was set up for a commodity price shock as the country’s main export products are copper and cobalt. Regarding the contingent liability stress test, a shock of 7.5 percent of GDP was used. The shock includes the default value of 5 percent of GDP for financial markets, a zero percent of GDP for risks associated with private-public partnerships (PPPs) as there are no PPPs in DRC, and 0.5 percent of GDP for SOEs to acknowledge the risk of having unreported debt due to the lack of regular reporting between the authorities and SOEs (Text Table 1).

Text Table 6.Democratic Republic of the Congo: Composite Indicator and Threshold
Debt Carrying CapacityWeak
Note: The current vintage refers to the 2019 April WEO vintage; The previous vintage refers to the 2018 October WEO vintage.
FinalClassification based on current vintagethe previous vintage (2015)Classification based on the two previous vintages
WeakWeak 1.98Weak 2.04Weak 2.09
Note: The current vintage refers to the 2019 April WEO vintage; The previous vintage refers to the 2018 October WEO vintage.
Tables
Applicable thresholds
APPLICABLE
EXTERNAL debt burden thresholds
PV of debt in % of
Exports140
GDP30
Debt service in % of
Exports10
Revenue14
APPLICABLE
TOTAL public debt benchmark
PV of total public debt in percent of GDP35
Note: The current vintage refers to the 2019 April WEO vintage; The previous vintage refers to the 2018 October WEO vintage.
Note: The current vintage refers to the 2019 April WEO vintage; The previous vintage refers to the 2018 October WEO vintage.
Text Table 7.Democratic Republic of the Congo: Risk Ratings
External Debt Distress RatingOverall Risk Rating
Mechanical overall debt distress ratingModerateModerate
Final external debt distress ratingModerateModerate
Judgement was appliedNoNo
Sources: Country authorities; and staff estimates and projections.
Sources: Country authorities; and staff estimates and projections.

External Debt Sustainability

Baseline

9. External debt would be sustainable in the baseline scenario, but with vulnerabilities stemming from some structural weakness. All indicators remain well below the indicative thresholds for the PV of debt ratios and for the debt service ratios. Specifically, the PV of PPG external debt-to-GDP ratio peaks at 9.2 percent in 2019 against a 30 percent threshold. The debt service-to-revenue is 11.3 percent in 2019, well below the threshold (14 percent), and steadily declines starting in 2021 throughout the rest of the projection period. The results show some space to absorb shocks in the Congolese economy although the low level of government revenues may undermine future debt sustainability and the ability of the government to borrow externally to finance its development and public investment plans.

Alternative scenarios and stress tests

10. Several external debt ratios breach their thresholds under the extreme shock3 scenario (Figure 1). Under the exports shock scenario, the ratios of the PV of debt-to-exports, debt service-to-exports and debt service-to-revenue breach their respective thresholds, reflecting DRC’s vulnerability to export shocks. The mining sector constitutes the main source of export receipts and a key driver of economic growth and it is very sensitive to the volatility of international prices. The results also highlight the need to build buffers given low FX reserves at the BCC.

11. The low level of revenues explains why the country is classified as having a moderate risk of debt distress despite a low stock of external debt. As shown in Figure 5, the debt service-to-revenue ratio shows only some space for additional borrowing in the short term without worsening the debt rating. Revenues averaged only 9.5 percent of GDP in 2016–17, compared with 20 percent of GDP in SSA. Increasing revenue mobilization is a priority to create fiscal space to be able to invest in much needed infrastructure and priority sectors and generate inclusive growth.

12. Risks stem from commodity prices and the ability to carry meaningful reforms. As illustrated in the commodity price stress test, the country is highly vulnerable to external shocks because it is strongly dependent on volatile mining exports. The DRC needs to build buffers through prudent macroeconomic and indebtedness policies. The DGDP needs to prepare a medium-term debt strategy consistent with the sustainability of debt and efficient use of borrowed resources. In this regard, the authorities need to ensure the high quality of projects being financed and to prioritize concessional borrowing.

Public Debt Sustainability

Baseline

13. Consistent with the 2019 AIV DSA, domestic debt remains high During the past years, authorities have made strong efforts to account for and reconcile accumulated arrears to suppliers and VAT arrears to the private sector accrued during the recent economic crisis. Total domestic debt now represents 6.5 percent of GDP, which brings total public debt to 20.3 percent of GDP at end-2018. The ratio of the PV of total debt-to-GDP remains below the threshold during the projection period. The baseline scenario assumes an ambitious repayment profile of arrears over the next 15 years. A conservative assumption of full amount is projected to be repaid to provision for the unaudited amount. However, while repayment of legacy arrears from social and financial are repaid in full, legacy arrears from other categories are subject to a discounted payment. Overall, the authorities expect to repay 72 percent of the legacy arrears. The PV of public debt-to-GDP ratio would reach 16.4 percent in 2019, well below the 35 percent threshold, and would follow a downward trajectory the following years, declining to 5.8 percent by 2029.

Alternative scenarios and stress tests

14. Stress tests confirm DRC’s vulnerability to external shock and repayment capacity. Based on the evolution of ratios of the PV of debt-to-GDP and to revenue, the most extreme shock is the commodity price shock, in line with the findings of the previous section (Figure 2). The PV of debt-to-GDP peaks at 31.7percent, still below the 35 percent threshold in 2021 and declines thereafter. The most extreme shock for the debt service-to-revenue ratio is the combined contingent liabilities shock (e.g., bank recapitalization). The ratio of debt service to revenue would reach more than 50 percent in 2021, while being forecasted to be below 10 percent in 2019.

Risk Rating and Vulnerabilities

15. The external and overall risk of debt distress for the DRC remain moderate. Under the external indicators, the debt service-to-revenue ratio is below the 14 percent threshold in the first years of projections and declines steadily afterwards. However, lower revenues or higher borrowing (or both) could push the rating to high risk of debt distress, even more so in the case of non-concessional borrowing. Moreover, as shown in the stress tests, the country is prone to severe shocks, especially through the export channel. External arrears are below 1 percent of GDP qualifying as de minimus case, so they do not affect the risk rating consideration. Domestic arrears rose significantly in recent years and will likely increase further after completion of the audit of legacy arrears. It is important that the authorities refrain from accumulating additional domestic arrears and prepare realistic plans to repay them. The current low level of domestic debt still justifies the moderate risk of debt distress rating.

16. Despite low total public debt levels, low debt repayment capacity remains one of the key vulnerabilities. The weak revenue mobilization is reflected in debt service-to-revenue ratios with only some space to absorb negative shocks, especially at the beginning of the projection period (Figure 5). A cautious borrowing policy, as well as prudent fiscal policy supported by domestic revenue mobilization and structural reforms including for better management of public investments, will be key to supporting the authorities’ ambitions to scale up public investment in infrastructure.

Authorities’ Views

17. The authorities broadly agreed with the overall assessment of the country’s debt sustainability. The new government supported increased transparency and full disclosure of public debt. The authorities committed to further broaden debt coverage, especially for SOEs, and to audit the rest of the legacy arrears. While committed to prioritize concessional borrowing, they also noticed the scarcity of it. They agreed with the need to prepare a medium-term strategy to help frame the debt policy and strengthen debt management capacity.

Figure 1.Democratic Republic of the Congo: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, 2019–2029

Sources: Country authorities; and staff estimates and projections.

1/ The most extreme stress test is the test that yields the highest ratio in or before 2029. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented.

Figure 2.Democratic Republic of the Congo: Indicators of Public Debt under Alternative Scenarios, 2019–2029

Sources: Country authorities; and staff estimates and projections.

1/ The most extreme stress test is the test that yields the highest ratio in or before 2029. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented.

Figure 3.Democratic Republic of the Congo: Drivers of Debt Dynamics – Baseline Scenario

1/ Difference between anticipated and actual contributions on debt ratios.

2/ Distribution across LICs for which LIC DSAs were produced.

3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation.

Figure 4.Democratic Republic of the Congo: Realism Tools1

1/ Public and private investment rates are preliminary and based on national accounts information. Some discrepancies with fiscal accounts information are expected.

Figure 5.Democratic Republic of the Congo: Qualification of the Moderate Category 2019–20291

Sources: Country authorities; and staff estimates and projections.

1/ For the PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent. For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent.

Table 1.Democratic Republic of the Congo: External Debt Sustainability Framework, Baseline Scenario, 2016–2039(in percent of GDP, unless otherwise indicated)
Sources: Country authorities; and staff estimates and projections.1/ Includes both public and private sector external debt.2/ Derived as [r – g – ρ(1+g) + Ɛα(1+r)]/(1+g + ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ =nominal appreciation of the local currency, and α = share of local currency-denominated external debt in total external debt.3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.4/ Current-year interest payments divided by previous period debt stock.5/ Defined as grants, concessional loans, and debt relief.6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).7/ Assumes that PV of private sector debt is equivalent to its face value.8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.
Sources: Country authorities; and staff estimates and projections.1/ Includes both public and private sector external debt.2/ Derived as [r – g – ρ(1+g) + Ɛα(1+r)]/(1+g + ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ =nominal appreciation of the local currency, and α = share of local currency-denominated external debt in total external debt.3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.4/ Current-year interest payments divided by previous period debt stock.5/ Defined as grants, concessional loans, and debt relief.6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).7/ Assumes that PV of private sector debt is equivalent to its face value.8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.
Table 2.Democratic Republic of the Congo: Public Sector Debt Sustainability Framework, Baseline Scenario, 2016–2029(in percent of GDP, unless otherwise indicated)
Sources: Country authorities; and staff estimates and projections.1/ Coverage of debt: The central, state, and local governments, central bank, government-guaranteed debt, non-guaranteed SOE debt. Definition of external debt is Residency-based.2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections.3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt.4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows.5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question.6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.
Sources: Country authorities; and staff estimates and projections.1/ Coverage of debt: The central, state, and local governments, central bank, government-guaranteed debt, non-guaranteed SOE debt. Definition of external debt is Residency-based.2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections.3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt.4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows.5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question.6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.
Table 3.Democratic Republic of the Congo: Sensitivity Analysis for Key Indicators of PPG External Debt, 2019–2029(in percent)
Projections 1/
20192020202120222023202420252026202720282029
PV of debt-to GDP ratio
Baseline910987655444
A. Alternative Scenarios
A1. Key variables at their historical averages in 2019–2029 2/99887777788
B. Bound Tests
B1. Real GDP growth9101098765544
B2. Primary balance91112121111109988
B3. Exports917272624232221191817
B4. Other flows 3/911121110988776
B5. Depreciation912987654333
B6. Combination of B1-B591515131211109887
C. Tailored Tests
C1. Combined contingent liabilities9111212111099888
C2. Natural disastern.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
C3. Commodity price911121110987665
C4. Market Financingn.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
Threshold3030303030303030303030
PV of debt-to-exports ratio
Baseline3541383328242119171615
A. Alternative Scenarios
A1. Key variables at their historical averages in 2019–2029 2/3536353128262627293134
B. Bound Tests
B1. Real GDP growth3541383328242119171615
B2. Primary balance3545504845414037353432
B3. Exports35105243222205191186176164154144
B4. Other flows 3/3548524640363330282625
B5. Depreciation354131252117141211109
B6. Combination of B1-B53571557264585449454240
C. Tailored Tests
C1. Combined contingent liabilities3549514743403835343331
C2. Natural disastern.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
C3. Commodity price3551544640353229262422
C4. Market Financingn.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
Threshold140140140140140140140140140140140
Debt service-to-exports ratio
Baseline53655454222
A. Alternative Scenarios
A1. Key variables at their historical averages in 2019–2029 2/52554443222
B. Bound Tests
B1. Real GDP growth53655454222
B2. Primary balance53655554333
B3. Exports54151615131414151514
B4. Other flows 3/53655454333
B5. Depreciation53655443222
B6. Combination of B1-B553988777554
C. Tailored Tests
C1. Combined contingent liabilities53655454332
C2. Natural disastern.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
C3. Commodity price53665554333
C4. Market Financingn.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
Threshold1010101010101010101010
Debt service-to-revenue ratio
Baseline11511109897554
A. Alternative Scenarios
A1. Key variables at their historical averages in 2019–2029 2/1151098776444
B. Bound Tests
B1. Real GDP growth115121110997554
B2. Primary balance1151111109108676
B3. Exports115141514121313141413
B4. Other flows 3/115111110998666
B5. Depreciation11614121110108554
B6. Combination of B1-B5115131211101010777
C. Tailored Tests
C1. Combined contingent liabilities115111110998555
C2. Natural disastern.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
C3. Commodity price1151212119108665
C4. Market Financingn.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
Threshold1414141414141414141414
Sources: Country authorities; and staff estimates and projections.

A bold value indicates a breach of the threshold.

Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Includes official and private transfers and FDI.

Sources: Country authorities; and staff estimates and projections.

A bold value indicates a breach of the threshold.

Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Includes official and private transfers and FDI.

Table 4.Democratic Republic of the Congo: Sensitivity Analysis for Key Indicators of Public Debt, 2019–2029
Projections 1/
20192020202120222023202420252026202720282029
PV of Debt-to-GDP Ratio
Baseline16171614131198776
A. Alternative Scenarios
A1. Key variables at their historical averages in 2019–2029 2/1614118531-1-2-3-4
B. Bound Tests
B1. Real GDP growth1618191716151413131312
B2. Primary balance1621232118161513121110
B3. Exports1623323028262422201917
B4. Other flows 3/16192018161413111098
B5. Depreciation1618161412976432
B6. Combination of B1-B516191815131198765
C. Tailored Tests
C1. Combined contingent liabilities1624222018161413121110
C2. Natural disastern.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
C3. Commodity price1618191818171616151515
C4. Market Financingn.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
TOTAL public debt benchmark3535353535353535353535
PV of Debt-to-Revenue Ratio
Baseline13912811810086726356504741
A. Alternative Scenarios
A1. Key variables at their historical averages in 2019–2029 2/139107825635196(5)(13)(21)(28)
B. Bound Tests
B1. Real GDP growth139135134120109989289878884
B2. Primary balance1391551681441251099891848173
B3. Exports139172230207188170160151139132119
B4. Other flows 3/139140142124108948477696558
B5. Depreciation1391381209981634938282011
B6. Combination of B1-B513914013110587716053474438
C. Tailored Tests
C1. Combined contingent liabilities1391761601371201049486807770
C2. Natural disastern.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
C3. Commodity price139145144136127116110106103105101
C4. Market Financingn.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
Debt Service-to-Revenue Ratio
Baseline56212119191715131211
A. Alternative Scenarios
A1. Key variables at their historical averages in 2019–2029 2/551215121197433
B. Bound Tests
B1. Real GDP growth56242727282726242423
B2. Primary balance56405037292420171716
B3. Exports56222422211919191918
B4. Other flows 3/56212120191716141313
B5. Depreciation56232021191815121110
B6. Combination of B1-B556202923201715121211
C. Tailored Tests
C1. Combined contingent liabilities56544031262219151413
C2. Natural disastern.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
C3. Commodity price56232329323130272726
C4. Market Financingn.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.
Sources: Country authorities; and staff estimates and projections.

A bold value indicates a breach of the benchmark.

Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP.

Includes official and private transfers and FDI.

Sources: Country authorities; and staff estimates and projections.

A bold value indicates a breach of the benchmark.

Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP.

Includes official and private transfers and FDI.

Figure 3.Democratic Republic of the Congo: Drivers of Debt Dynamics – Baseline Scenario

1/ Difference between anticipated and actual contributions on debt ratios.

2/ Distribution across LICs for which LIC DSAs were produced.

3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation.

1

DRC Composite Indicator (CI) score is 1.98, which corresponds to a weak debt-carrying capacity as confirmed by April 2019 WEO assumptions and 2017 Country Policy and Institutional Assessment (CPIA).

2

Box 1, Debt Sustainability Analysis, IMF Country Report No. 15/280.

3

Nominal export growth (in USD) is set to its historical average minus one standard deviation, or to the baseline scenario’s projection minus one standard deviation, whichever is lower in 2021–22.

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