The collapse of the expenditure control system and revenue collection, and the resulting monetization of an uncontrolled budgetary deficit, were identified as the primary source of the vicious circle of hyperinflation and falling currency that plagued the Democratic Republic of the Congo (DRC) economy until the end of 2000.

Section I. Introduction

The collapse of the expenditure control system and revenue collection, and the resulting monetization of an uncontrolled budgetary deficit, were identified as the primary source of the vicious circle of hyperinflation and falling currency that plagued the Democratic Republic of the Congo (DRC) economy until the end of 2000.

A substantial tightening of the budgetary policy, through a number of revenue-enhancing and expenditure-restraining measures, was therefore a key element of the new economic strategy adopted by the government in 2001 to achieve macroeconomic stability. Measures aiming at improving governance and budget transparency were also part of the comprehensive budget reforms that were progressively implemented under a staff-monitored program (SMP) and its successor Poverty Reduction and Growth Facility (PRGF) arrangement.

In this context, rebuilding the macroeconomic management capacity was viewed as a necessary condition for the success of this strategy. Regular administrative processes within the ministry of finance, the revenue-collecting agencies, and the public administration, in general, had been impaired by years of mismanagement and the war, a lack of experience, and an absence of basic equipment. The implementation of the economic program of the government needed, therefore, to be supported by a comprehensive technical assistance program.

This chapter addresses the challenges faced in rebuilding macroeconomic institutions, focusing in particular on the fiscal area1 and emphasizing the need for comprehensive and timely external technical assistance. Section II presents a brief description of the overall strategy for reforming fiscal institutions and providing technical assistance to that end. Sections III, IV, and V describe the reform programs designed and implemented in the areas of public expenditure management, revenue mobilization, and civil service reform, respectively. Section VI discusses the lessons learned from the experience in the DRC and the challenges facing the future reinforcement of fiscal institutions.

Section II. Overall Strategy and the Role for the International Monetary Fund and Other Donors

Contrary to some other postconflict cases, the DRC was still in conflict when it resumed its relations with the international community and radically shifted the conduct of its economic policy; consequently, many external partners were not ready to provide technical assistance from the outset. Therefore, the IMF played a leading role in assisting the DRC, not only by designing and monitoring overall reform strategies, but also by providing hands-on assistance at the early stages of implementation.

IMF assistance was initiated by a multitopic fact-finding mission fielded in March 2001, which carried out an initial diagnosis of the macroeconomic situation, proposed emergency measures, and identified technical assistance needs. It was quickly followed by specialized missions that undertook detailed assessments and designed specific road maps in all the areas of IMF expertise: monetary policy and management of the central bank, the conduct of monetary policies and production of macroeconomic statistics, as well as, in the fiscal area, revenue administration and policies and budget and expenditure management. The general approach underlying these recommendations was to distinguish between immediate priority measures, which aimed to fix the basics first and relied as much as possible on the existing systems to yield immediate results, and medium- and long-term action plans designed to strengthen and modernize in depth the country’s institutional capacity. In the area of civil service reform, where the IMF has no specific expertise but which is critical for the success of reforms, the United Nations Development Program (UNDP) and the World Bank played the leading role, in coordination with other donors.

The government endorsed these strategies and was assisted in implementing the fiscal reforms and monitoring overall progress through a combination of a strong resident technical assistance program, with the posting since the beginning of 2002 of three IMF resident experts (in expenditure management, customs administration, and tax administration, respectively), and regularly scheduled specialized follow-up missions to assess the reforms undertaken, provide complementary guidance, and suggest further improvements.2

Although the IMF clearly had the lead on the reform and modernization of revenue and expenditure management systems, good coordination with other donors was essential to the success of this program. The World Bank provided, in particular, substantial financing to complement and support the IMF-sponsored reforms with the necessary equipment, information systems, and training. It is also providing complementary technical assistance in specialized areas, such as procurement reform and corporate taxation. The public expenditure review it undertook in 2002 was also useful in forging the links between the macroeconomic and sectoral reforms by identifying the priority sectors toward which the composition of expenditure was expected to be reallocated, and by providing an initial assessment of the capacity of the Congolese authorities to track poverty-related expenditure.

Other donors are also getting more involved in providing technical assistance, and some of them have expressed their interest in supporting the IMF-recommended reform strategies through the assignment of resident experts, to complement or replace the IMF experts.

Section III. Strengthening Budget Control and the Tracking of Expenditure

By 2000, the expenditure management system had experienced a dramatic deterioration. Basic principles of sound expenditure management were no longer being respected: there was no budget, the expenditure process had broken down, a large part of government revenue and expenditure were being carried out outside the DRC Treasury, and government expenditure was no longer being reported in an orderly fashion. Reflecting resource constraints and disturbances arising from years of civil unrest and war, a large part of the public administration was not operational. While ad hoc procedures became the norm, and the role of the Central Bank of the Congo or BCC (Banque Centrale du Congo) grew, the ministry of finance was largely deprived of its capacity to control expenditure, although the treasury did manage to some extent to monitor the financial situation of the government.

Against this background, the strategy designed in 2001 with the assistance of the IMF to rehabilitate expenditure management was based on two pillars:

  • bringing the annual budget back to the center of expenditure management through the timely adoption of a comprehensive and realistic budget that reflects the priorities of the government; and

  • restoring an orderly budget execution process, including the rebuilding of an effective commitment control function.

On this basis, a gradual approach was developed. The first steps, included in the SMP negotiated by the authorities with the IMF in 2001, were intended to address the most critical shortcomings in the management capacity of the government’s financial operations, in particular by centralizing all revenue and expenditure in the treasury account at the central bank and under the treasury’s supervision. These actions were complemented by the establishment of a medium-term strategy for the rehabilitation and modernization of the public expenditure management system, implemented with the assistance of a long-term resident expert appointed in February 2002 and of other donors.

Cash Management and Financial Planning

Immediate priority was put on restoring the capacity of the ministry of finance to record and control all revenue and expenditure. The objective was emphasized because cash planning and management are indispensable to keep expenditure within target and to prevent unanticipated borrowing that might disrupt monetary policy and trigger hyperinflation. To perform this task, the ministry of finance needs to control all public monies.

Although in theory all revenue and expenditure were covered by the budget, a large share of government revenue, coming from public enterprises and oil production and distribution, actually followed extra-budgetary channels. Amounting to one-fourth of total central government revenue (1.7 percent of GDP in 2001), this revenue financed sovereignty expenditure or fuel consumption, either through separate bank accounts in private banks or direct compensation with government expenditure. To ensure the consolidation of cash resources, avoid the fragmentation of budget revenue, and increase transparency in the management of public finance, this revenue and the corresponding expenditure were gradually reintegrated into the treasury account at the central bank by the closure of the bank accounts and the suppression of the offsetting mechanisms.

In addition, a large amount of expenditure was actually paid from the treasury account by the central bank without prior authorization (and even prior knowledge) of the ministry of finance. These outlays were gradually reduced, starting at the end of 2001, and a presidential decree, although not immediately respected, was adopted in April 2002 forbidding the financing of any government expenditure without the prior approval of the ministry of finance.

Finally, efforts are being made to reconcile on a regular basis the fiscal data of the treasury directorate and of the central bank. Two reconciliation meetings are now being held every week: one on revenue and the other on expenditure. The installation of a computerized link between the central bank and the treasury and the reorganization—expected in 2004—of the government cashier’s operations within the central bank, which are currently split among five services within the BCC, should improve the quality and reliability of the data being exchanged between, and reconciled by, the two institutions.

On these bases, it is possible to improve government financial planning through the implementation of a monthly cash-flow plan. Designed with the assistance of the IMF and a key element of the program with the IMF, the monthly plan is regularly being updated by a team under the supervision of the cabinet of the ministry of finance in light of actual revenue, expenditure, and financing, and is used to program expenditure. The adoption of a commitment plan, setting expenditure limits for each ministry and institution and revised regularly in accordance with the treasury cash-flow plan, is a key element to regulate expenditure to avoid a buildup of arrears payments.

Future enhancement of cash management will include a streamlining of the numerous bank accounts held by line ministries and agencies in commercial banks, through the implementation of a plan to consolidate gradually the government’s accounts in the treasury account at the BCC and reconcile permanently the remaining accounts under the treasury’s authority.

Budget Formulation

Until 2001, the annual budget, if any, was adopted late in the year. By that time, it had lost its significance as a tool to allocate and prioritize expenditure, owing to the primacy of extrabudgetary or irregular procedures and to the rapidly changing context of hyperinflation and depreciation. One of the first measures of the economic program of the government, adopted in May 2001, was the preparation and adoption during the year of a budget for 2001 and the timely adoption (in early 2002) of the 2002 budget through a normal budgetary process. Efforts were made, with some assistance from the UNDP, to improve data compilation, prioritization, and coordination. Significant progress is still needed, however, to improve the construction of the macroeconomic-fiscal framework underpinning budget estimates and revenue projections; the budget preparation process, including the schedule and procedures for submissions by line ministries; the estimates for utility payments (water, electricity, etc.) based on improved control procedures; and the integration in the annual budget of externally financed projects. Only once these prerequisites for a simple annual line-item budgeting have been achieved can the development of a medium-term fiscal framework be envisaged.

In the meantime, however, some progress was made in improving the budget presentation with the adoption of a new classification system. The 1996 budget classification system was not in concordance with international standards and was not used for budget execution reporting. A new system was prepared with the assistance of the IMF resident advisor, including streamlined economic and administrative classifications, as well as a functional classification system compatible with international standards. This new classification system was introduced in the 2003 supplementary budget and the 2004 budget. On this basis, budget documentation is being streamlined and simplified to improve fiscal transparency. The new functional classification system is also being used to define and track poverty-related expenditure, in line with the sectoral priorities set out in the DRC’s interim Poverty Reduction Strategy Paper.

Budget Execution

Although in theory budget execution relies on complete but rather cumbersome procedures, most expenditure was in reality executed through fast-track procedures, involving the direct submission of payment orders to the minister of finance. As a consequence, commitments were neither controlled nor recorded, paving the way for the building up of arrears, and public expenditure was poorly recorded and classified.

Against this background, reestablishing an orderly budget execution process was key to restoring effective control over expenditure and improving the transparency and tracking of spending, in particular in the context of the access of the DRC to the enhanced Heavily Indebted Poor Countries Initiative. To this end, new execution procedures, simplifying the official execution process and reinstating commitment control, were designed with the assistance of the IMF technical expert. Taking into account both the existing organization and the country’s administrative capacity, the proposed procedures were based on the following principles: (1) the current system of expenditure payment and tax collection by the banking system—adopted in 1997 to end widespread corruption by public accountants—should be maintained; (2) the treasury department (Direction du Trèsor et de l’Ordonnancement) should play the key role at the payment order stage of the expenditure process, as well as in the centralization and collection of financial information; and (3) the commitment stage should be reestablished beforehand.

The new procedures are supported by the implementation of a simple computerized information system, designed with IMF and World Bank assistance, and limited at first to the operations carried out by the relevant directorates of the ministries of budget and finance. It also involves reinforcement of the administrative capacity within these ministries through the equipment and partial reorganization of the main directorates involved in the budget execution chain, as well as the implementation of a training program financed by the World Bank.

Limited at first to current expenditure at the central level, the new execution system will be expanded to foreign-financed investments, which are currently managed through specific execution procedures and banking arrangements, and to the central government’s operations at the local level. Special arrangements will also be necessary to take into account the specificities of the wage payment process, based on the conclusions of an audit of the payroll carried out by the French Cooperation (see Section V).

Accounting and Reporting

The implementation of the new execution procedures and of the associated computerized information system allows for the production of monthly execution reports at various stages of the execution process and in line with the economic, administrative, and functional classification system. However, the current single-entry accounting system cannot provide a full picture of the government’s financial position, as it (1) cannot account for transactions such as transfers to provinces and cash advances, (2) treats assets and liability transactions as revenue or expenditure, and (3) cannot adequately track arrears. A new double-entry accounting framework will be developed in 2004, to be fully implemented in 2005.

Section IV. Enhancing Revenue Collection

Raising revenue mobilization from the very low levels collected in 2000 (5.1 percent of GDP, including off-budget revenue, one of the lowest ratios in the world) was essential to regain fiscal sustainability and finance reconstruction. With the decline in economic activity, the shift of transactions to the nonofficial economy, and the loss of control by the government of almost half of its territory,3 the tax base had been shrinking. The poor revenue performance also resulted from the following factors: (1) the tariff and tax system was complex, owing to a plethora of taxes and other levies and to the multiplicity of rates applicable to each of them, and therefore both difficult to administer and an incentive to tax evasion; (2) the tax and customs base was narrow, owing to the numerous exemptions, deductions, and discretionary measures, particularly for public enterprises; and (3) the collecting agencies were hampered by a chaotic organizational structure, archaic procedures and systems, insufficient equipment, a lack of staff motivation, poor tax compliance, and fraud. These factors, which had resulted from years of mismanagement, only worsened during the war.

In addition to these general factors, revenue performance in recent years had been hurt because, in a context of a widening gap between the official and parallel market exchange rates, the official exchange rate had been used to assess the value of the taxable base for import and export duties, as well as for other revenues whose taxable base had been expressed in dollar terms. However, one of the first measures of the economic program adopted by the government in May 2001 was to allow the official exchange rate to float freely, thereby unifying the official and parallel market rates and generating a large positive impact on revenue collection.

Against this background, the IMF helped the authorities to design a reform program aimed both at improving revenue mobilization and facilitating economic activity by modernizing the tax system and its administration and reducing the burden on the formal economy.

Considering the weak initial administrative capacity, and despite the recognition of the need to reform the tariff and tax system, the IMF staff recommended that the authorities focus at first on short-term measures to strengthen the tax and customs departments before introducing policy reforms.

Strengthening the Customs and Tax Administrations

Central government revenues are collected by three main agencies: the Office des Douanes et Accises (OFIDA) collects customs duties, excises, and the turnover tax on imports; the Direction Gènèrale des Contributions (DGC) collects domestic direct and indirect taxes; and the Direction Gènèrale des Recettes Administratives, Judiciaires et Domaniales (DGRAD) collects nontax revenues. While measures were taken to secure the role of DGRAD in collecting nontax revenues (especially those revenues that were diverted to finance extrabudgetary expenditure and had to be centralized at the treasury), the reforms adopted by the government, in line with the IMF’s recommendations and with its resident technical assistance, focused on the two main agencies: OFIDA and the DGC.

These measures included improvements in data collection, management information systems, internal management, and basic equipment; the reinvolvement of the revenue-collecting agencies in key economic sectors, such as petroleum distribution; and a stricter control of exemptions and special regimes. One of the key elements of the adopted strategy was to concentrate the efforts at first on restoring the administrative capacity to collect revenue from the main revenue sources, before extending the reforms to the whole country and to all taxpayers.

Along these lines, the first phase of the reform program—corresponding to the preliminary measures taken before the introduction of any policy measures—for tax administration (the DGC) was the creation of a large taxpayers’ unit (LTU) to secure about 70 percent of total tax collections and to introduce modern organizational principles and procedures supported by computer systems. With the creation of this unit and the parallel reorganization of the DGC headquarters, modern procedures were introduced, initially for the large taxpayers (e.g., self-assessment principles for filing and payment and simplified collection procedures). A training program was implemented for the staff of the LTU, and a new information technology system was developed.

Regarding customs administration, measures adopted during the first phase of the reform strategy included the implementation of a management system providing basic statistical reports and monitoring activities of the customs offices—including a closer monitoring of exemptions—and the establishment of a pilot customs office in Matadi (the DRC’s main port of entry) to develop new procedures and systems—including the Automated System for Customs Data (ASYCUDA).

In the second phase of the reform process, the objective of the modernization program is to expand the new organizational principles, procedures, and systems to cover the entire revenue administration. Relying on the new processes developed in the LTU and the pilot customs office, these programs include the following measures:

  • modernization of the tax department (the DGC, which has been renamed Direction Gènèrale des Impôts, or DGI), by strengthening the headquarters functions; restructuring the network of local offices—beginning with the establishment of specialized units (Centres des Impôts) to control medium-sized enterprises, initially in Kinshasa and eventually, by expanding this approach throughout the main cities of the country; generalizing the taxpayer numbering system; and extending the procedures and system developed for the LTU to other services (beginning with the Centres des Impôts); and

  • modernization of OFIDA by simplifying the clearance process; undertaking a major reorganization of the department before the ASYCUDA system is gradually adopted; and developing selective postcontrol approaches.

Tariff and Tax Reform

Once short-term measures to strengthen the tax and customs administrations had been introduced, the Congolese authorities expressed their willingness to reform the tax system, starting with a tariff reform consistent with the DRC’s commitments under regional trade agreements,4 accompanied by domestic taxation measures to compensate for revenue losses.

In line with the IMF’s November 2002 recommendations, a set of reform laws on tariff and indirect taxation was adopted by parliament in March 2003, with the overall revenue impact of the reform evaluated at about 1 percent of GDP.

The new tariff law is intended to be easier to administer, to reduce the scope for smuggling and fraud, to correct the bias of the previous tariff in favor of commercial activities, and to prepare the DRC to meet its commitments under regional trade agreements. The law (1) establishes a simple three-rate tariff structure (5 percent for agricultural and pharmaceutical inputs, investment goods, and raw materials; 10 percent for intermediate and essential goods; and 20 percent for other final consumption goods) in place of the previous five-rate structure; (2) eliminates the surtax that was applied to a list of specific products; and (3) precludes preferential treatment.

The reform of indirect taxation was designed to compensate for the revenue losses expected from the tariff reform while simplifying the tax system and preparing for the introduction of a value-added tax (VAT) in the future. It included the following:

  • The turnover tax (impôt sur le chiffre d’affaires) was reformed by applying the 3 percent rate only to investment goods and agricultural inputs and the 13 percent rate to all other products, and by authorizing enterprises to deduct the turnover tax paid on their inputs. This credit mechanism, designed to limit the cascading effects of the turnover tax while preparing for the introduction of a VAT, is, for administrative capacity reasons, limited at first to the large enterprises under the responsibility of the LTU.

  • The 13 percent turnover tax was extended to all the products subject to excises.

  • The petroleum product price structure was simplified by increasing the excises and eliminating all parafiscal levies.

Despite some initial difficulties in drafting and implementing this reform package, it is now fully implemented and already starting to have a positive impact on overall government revenue. It will have to be complemented by strict control over all tax exemptions. This means ensuring that all new tax and customs exemptions are fully compliant with the provisions of the newly enacted investment, mining, and forestry codes,5 and may also entail the revision of some exoneration conventions granted in the past.

On these bases, the next steps in the simplification and rationalization of the tax system should include the following:

  • Measures are needed to simplify the taxes and duties (including parafiscal levies) applicable to private and public enterprises to improve the business environment, following a review of these taxes undertaken with the assistance of the World Bank. A rationalization of the taxes levied by DGRAD (including the suppression of the taxes for which there was no legal basis) is under way. This rationalization has to be complemented by a parallel exercise for fees and duties collected by other bodies and by a reform of the corporate tax. The sectoral economic reviews undertaken with the assistance of the World Bank are providing the basis for streamlining specific taxation in key economic sectors, such as the forestry sector.

  • The turnover tax should be replaced with a VAT to reduce economic distortions and to increase revenue collection. Pending the satisfactory implementation of the 2003 reform and further improvement in administrative capacity, this action could be envisaged in 2005.

Section V. Reforming the Civil Service

Although adequate control over the wage bill and efficient operation of the civil service, including within the ministry of finance and its agencies, was critical for the success of the program, the management and functioning of the civil service were hampered by the following characteristics:

  • Strong uncertainties surrounded the number of civil servants, owing to the multiplicity of services involved in the payment process, the absence of an integrated payroll database, and the war, which had taken a heavy toll on the population and caused massive displacements of refugees, including civil servants. While the number of civil servants in the occupied provinces, who were not paid, was largely unknown, the number of civil servants in the provinces under the control of the government was also uncertain, despite some surveys undertaken by the authorities that had led to the elimination of some identified “ghost” workers.

  • The structure of the civil service was inadequate, with a lack of skilled and well-trained staff, complex administrative structures, an aging workforce—about 70,000 staff over retirement age still in service because of the inability of the government to pay for severance allowances—and misallocation of staff resources, which remain heavily concentrated in Kinshasa.

  • Wage levels, which had been largely eroded by hyperinflation, were very low, thus generating weak work incentives and increasing exposure to corruption. The wage scale (including transportation bonuses) in 2003 was between US$2 (the bottom level outside Kinshasa) and US$45 a month, with an average of less than US$15. At 1.5, the ratio of the average civil service wage per staff to GDP per capita (a measure of the well-being of the civil service compared with that of the average individual) is the lowest in sub-Saharan Africa.

Against this background, the government developed, with the assistance of the UNDP and other donors, a strategy to reform the civil service and public administration. It includes (1) a revision of the legal framework; (2) a census of the civil service; (3) an audit of payroll procedures, to be followed by their reorganization; (4) a restructuring of all ministries, starting with pilot operations for the ministries of budget, finance, planning, and civil service; (5) a retirement program for staff over retirement age; and (6) a training program.

Considering the uncertainties surrounding the number of civil servants, the reported extent of ghost workers and workers above retirement age, and the relative size of the civil service as opposed to the very low wage levels, the effective implementation of a civil service census rapidly emerged as a priority. With World Bank assistance, the methodology for a general civil census was defined, and the census, financed by the international community, is expected to take place in 2005. The payroll system will be audited in parallel, with the assistance of the French Cooperation, with a view to establishing a new and secure system, expected to be made operational when the outcome of the census becomes available. Based on this outcome, a new effort will be made to eliminate ghost workers, a list will be compiled of active personnel eligible for the retirement program, personnel and payroll files will be created, and an in-depth civil service reform will be prepared, including a significant but progressive increase in the purchasing power of civil servants.

Section VI. Lessons and Challenges for the Future

Looking back at the progress achieved so far in rebuilding fiscal institutions and at the difficulties encountered, an important aspect of the proposed strategy is its sequencing. Based on a careful initial assessment of the problems as well as of the implementation capacity and the resource and skill constraints, the proposed strategy needs to identify the key measures necessary in the short term while drawing a clear road map for medium- and long-term reforms. The prerequisites for moving toward far-reaching measures—for example, the basic administrative requirements for introducing tax policy reforms—need to be clearly identified. In the area of civil service reform, delays in organizing the civil service census may have hampered the implementation of other key measures, although these delays will allow the census to cover the whole reunified country.

Although it is often necessary in the short run to rely on existing institutions and procedures, care should be taken to avoid consolidating inadequate organizations and processes. Regular follow-up is, therefore, critical in identifying such risks. For example, whereas the organization of the cashier operations within the central bank or the government accounting framework were not seen as priority reforms at the beginning of the process, an IMF technical assistance follow-up mission later helped to identify these measures as necessary to take full advantage of the reforms in public expenditure management already under way.

Sustained technical assistance is also essential in a context where the administrative capacity has been eroded by years of economic mismanagement and war. In postconflict countries, strategic advice will have to be supported by regular follow-up, as well as by assistance for hands-on implementation, whether undertaken by the same donor or by another one. This point can be illustrated by some difficulties encountered in implementing the tax reform during the second quarter of 2003, when the IMF tax expert had just been removed and not yet replaced. Good coordination among donors is also critical in that regard to ensure that all technical assistance or training needs are covered while avoiding overlapping assistance and contradictory advice.

However, the determining factor for success in rebuilding fiscal institutions is probably the clear recognition by the authorities of the economic problems faced by the country and their commitment to the reforms. This full ownership is necessary both from the political authorities and from top and middle managers within the administration. With a personal commitment to reforms at the highest level of the state, the appointment of reform-minded ministers, and good-faith efforts of managers in key administrative positions, the DRC offered a combination that allowed for the implementation of bold measures. On the contrary, one may notice that little progress was made during the few months of great political uncertainties that preceded the nomination of the new transitional government in June 2003. Following the new authorities’ demonstration of renewed commitment to the economic program, supported by the international community, the pace of reforms resumed. Institutional resistance to reforms was encountered at times, especially when a reorganization of some departments of the ministry of finance was envisaged, but the authorities overcame this through adequate communication of the rationale and benefits of the reforms and repeated demonstrations of political commitment.

Almost three years after resuming cooperation with the international community and embarking on a vast reform program, the DRC is now at a critical point. Reforms already undertaken in the areas controlled by the government need to be consolidated and extended to the whole country, while new reform initiatives are being launched.

The Congolese authorities should continue to focus their priorities on achieving a sustainable fiscal stance by (1) improving revenue mobilization without placing an excessive burden on the formal economy—this requires continuing the modernization of the revenue administration by extending the reforms already undertaken to the whole network of the tax and customs agencies, while rationalizing the tax system—and by (2) strengthening public expenditure management capacity and budget reporting in order to restore effective control over expenditure and to improve governance and budget transparency.

Increased attention will need to be paid to capacity building to ensure the sustainability of reforms. In that regard, external assistance should, maybe more than in the past, try to identify and promote skilled counterparts within the Congolese staff and offer adequate training, in coordination with traditional technical assistance.

The reunification of the country will pose additional challenges. The reforms under way in Kinshasa and in the provinces previously under government control will have to be progressively extended to the eastern and northern provinces, where administrative capacity has been even more severely damaged by the war. In the meantime, the new political context stemming from the peace agreements is expected to lead to a process of decentralization. Fiscal relations between the central government and the provinces, including the distribution of expenditure responsibilities and tax powers, transfers from the center, and reporting arrangements, will have to be carefully designed to prevent the expected improvements in service delivery from generating additional macroeconomic risks or reducing transparency.

Appendix 10.1. Key Issues and Measures in Rebuilding Fiscal Institutions

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Appendix 10.2. IMF Technical Assistance in the Fiscal Area (2001–03)

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Appendix 10.3. IMF Technical Assistance Reports

  • Benon, Olivier, and others, 2003 “République Démocratique du Congo: Modernisation de la DGC et de l’OFIDA − mise en place de la deuxième phase des réformes” (unpublished; Washington: Fiscal Affairs Department, International Monetary Fund).

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  • Bouley, Dominique, Denis Lepage, and Hans Kwant, 2004, “République Democratique du Congo: Pour un Renforcement de la Gestion des Finances Publiques” (unpublished; Washington: Fiscal Affairs Department, International Monetary Fund).

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  • Corfmat, François, and Patrick Fossat, 2001, “République Démocratique du Congo: Mobilisation des recettes fiscales – Axes prioritaires des réformes et stratégie de mise en place des mesures” (unpublished; Washington: Fiscal Affairs Department, International Monetary Fund).

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  • Geourjon, Anne-Marie, Bertrand Laporte, and Jean-Luc Schneider, 2003, “République Démocratique du Congo: Réforme de la Politique Tarifaire et Modernisation du Système Fiscal” (unpublished; Washington: Fiscal Affairs Department, International Monetary Fund).

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  • Schiller, Christian, Jérôme Fournel, and Jean-Paul Barrier, 2001, “République Démocratique du Congo: Axes Prioritaires pour la Réhabilitation de la Gestion des Dépenses Publiques” (unpublished; Washington: Fiscal Affairs Deparment, International Monetary Fund).

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Reforms adopted in the area of monetary policy and the management of the central bank are presented in Chapter 9, and reforms of the legal and judiciary framework are discussed in Chapter 11.


See Appendix 10.1 for a summary of key issues and measures in the fiscal area, Appendix 10.2 for a list of IMF technical assistance missions fielded in the fiscal area, and Appendix 10.3 for a list of technical assistance reports.


Before the beginning of the war in 1998, revenues collected from the provinces occupied by rebel movements had accounted for 10—20 percent of total government revenue.


The DRC is member of the Southern African Development Community and the Common Market for Eastern and Southern Africa.


See Chapter 11 for more details on the investment, mining, and forestry codes.