1. This statement contains information on developments in the Republic of Congo since the circulation of the staff report for the request for a new three-year arrangement under the Poverty Reduction and Growth Facility. The information does not alter the thrust of the staff appraisal.

2. The three prior actions related to oil sector transparency were implemented:

• The government published the 2002 external audit report of the national oil company (SNPC) on Internet sites (www.congo-site.cg and www.mefb-cg.org).¹

• The government signed a three-year contract with an audit firm of international reputation to undertake the annual external audits of the SNPC for each of the years during 2003-05 (using the same terms of reference as for the 1999-2001 audit).

• A press statement was published on the Republic of Congo’s internet sites (www.congo-site.cg and www.mefb-cg.org) and in local mass media on the July 2003 settlement between the Republic of Congo and Total E&P Congo. It provides details on the transactions related to the Likouala oil field concession and assurances that the Republic of Congo, the SNPC, and Total E&P Congo are the only parties involved in those transactions, and that all related benefits and profits accrue only to them, and not to other parties.

3. The authorities have paid the CFAF 18 billion of arrears accumulated in 2003 on post-cutoff-date debt to Paris Club creditors.

4. Preliminary data suggest that budget execution during the first three quarters of 2004 was broadly in line with the targets set out by the authorities. The primary fiscal surplus—adjusted for higher-than-projected oil prices and lower-than-expected shipments—was in line with the target. Also, non-oil revenue collection was higher than projected reflecting enhanced tax and customs administrations, and expenditure execution was kept under control. Owing to the favorable budgetary situation, net credit to the government from the banking system was below the projected level. In addition, nonreschedulable external debt was serviced on a timely basis, and domestic arrears payments were in line with projections.

5. With a view to strengthening the framework for program monitoring, the authorities put in place on November 15, 2004, a 10-member interministerial technical committee. In addition, the government has appointed the staff of the Audit Office.

6. In the governance area, following the Congo’s expulsion from the Kimberley Process for certification of conflict diamonds, the government organized in mid November a regional conference on the diamond trade that focused on the problem of diamond smuggling. To prevent the improper issuance of Kimberley Process certificates, the government is strengthening its administration along the lines of the recommendations made by the June 2004 Kimberley Process review mission. In addition, the Congo will organize an independent assessment of its diamond production potential which will serve as reference for future rough diamond exports by the Congo.

7. On the security front, the authorities have reported that vital rail services between Pointe Noire and Brazzaville—which were suspended in October following armed attacks by a rebel group—have resumed.