Front Matter

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© 2007 International Monetary Fund

September 2007

IMF Country Report No. 07/327

Democratic Republic of the Congo: 2007 Article IV Consultation—Staff Report; Staff Supplement; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for the Democratic Republic of the Congo

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2007 Article IV consultation with the Democratic Republic of the Congo, the following documents have been released and are included in this package:

  • The staff report for the 2007 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on June 7, 2007, with the officials of the Democratic Republic of the Congo on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on August 15, 2007. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.

  • A staff statement of September 5, 2007, updating information on recent developments.

  • A staff supplement on the joint Fund/World Bank debt sustainability analysis.

  • A Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its September 5, 2007 discussion of the staff report that concluded the Article IV consultation.

  • A statement by the Executive Director for the Democratic Republic of the Congo.

The documents listed below have been or will be separately released.

Selected Issues Paper and Statistical Appendix

Poverty Reduction Strategy Paper

Poverty Reduction Strategy Paper—Joint Staff Advisory Note

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to

Copies of this report are available to the public from

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Staff Report for the 2007 Article IV Consultation

Prepared by the Staff Representatives for the 2007 Consultation with the Democratic Republic of the Congo

Approved by Robert Corker and Mark Plant

August 14, 2007

  • Discussions took place in Kinshasa May 23-June 7. The staff team comprised Messrs. Briançon (head), Maret (Res. Rep.), Ben Ltaifa, Hartley, Farah (all AFR), Féler (PDR), and Westphal (FAD). Mr. Ames, who is to succeed Mr. Briançon, joined the mission on June 2, 2007. Mr. N’Sonde, office of the Executive Director, participated in policy meetings.

  • The mission met the ministers of finance, budget, planning, and mining, and the Governor of the Central Bank.

  • The last Article IV consultation was concluded on August 29, 2005. The last Poverty Reduction and Growth Facility (PRGF) arrangement expired at end-March 2006; the sixth review was not completed because of policy and reform slippages.

  • On June 18, 2007, the Board discussed the 2007 Staff Monitored Program (SMP). It expressed deep concern about the risk to the fiscal framework and macroeconomic stability of an expansionary budget. It also urged faster implementation of structural reforms.

  • The Democratic Republic of the Congo (DRC) reached the decision point under the enhanced Heavily Indebted and Poor Countries (HIPC) Initiative in July 2003. At the completion point it will receive HIPC debt relief and relief under the Multilateral Debt Relief Initiative (MDRI) of more than US$7 billion in NPV terms. Reaching the completion point would require a successful first review of a new PRGF arrangement, one year implementation of the Poverty Reduction Strategy Paper (PRSP) and the observance of the agreed triggers.

  • The exchange rate regime is an independent float. The DRC has accepted Article VIII sections 2(a), 3, and 4, of the Fund’s Articles of Agreement, but maintains an exchange restriction and a multiple currency practice.

  • The authorities agreed to publication of the mission concluding statement.


  • Executive Summary

  • I. Background

  • II. The PRGF Arrangement: Lessons and Challenges

  • III. Macroeconomic Framework for 2007

  • IV. Policy Discussions and the Medium-Term Policy Framework

    • A. Medium-Term Growth and Poverty Alleviation

    • B. Medium-Term Fiscal Strategy

    • C. Monetary Policy and Banking Sector Reform

    • D. Statistical Issues

  • V. Staff Appraisal

  • Text Tables

  • 1. Base and Alternative Scenarios, 2007–12

  • 2. Comparative Financial Indicators, 2006

  • 3. Financial Soundness Indicators, 2003–06

  • Figures

  • 1. GDP Growth and Inflation, 1998–2007

  • 2. Recent Fiscal Developments

  • 3. Recent Monetary Developments

  • 4. Governance Indicators 2005

  • 5. Growth Performance

  • 6. Real Effective Exchange Rate, December 2002-April 2007

  • Tables

  • 1. Selected Economic and Financial Indicators, 2004–12

  • 2. Central Government Financial Operations, 2004–12

  • 3. Central Government Financial Operations, 2004–12

  • 4. Monetary Survey, 2004–07

  • 5. Accounts of the Central Bank of the Congo, 2004–07

  • 6. Balance of Payments Summary, 2004–12

  • 7. Millenium Development Goals, 1990–2005

  • 8. Progress Status of Triggers for Reaching the Floating Completion Point under the HIPC Initiative

Executive Summary

The DRC has made significant economic and political progress since 2001, after years of turmoil. Rapid disinflation helped restore economic confidence and renew growth. The economy is now relatively open, and fiscal and monetary policies have become more effective. Democratic elections in 2006 marked the end of political transition.

The good economic performance proved difficult to sustain. Starting in 2005—and coinciding with the election cycle—fiscal loosening led to the re-emergence of inflation and a reduction of international reserves to low levels. Structural reforms also slowed.

The new government’s reassertion of fiscal discipline in early 2007 is threatened by an expansionary budget. The 2007 budget contains unrealistic revenue projections and concomitant higher spending, especially on wages. Execution of such a budget would widen the deficit, expand the monetary base, and prompt a new inflationary cycle. The government is assessing how to implement the budget and maintain macroeconomic stability.

Achieving high and sustained economic growth requires the stepping up of structural reforms. Over the medium term, economic growth is likely to benefit from a pick-up in mining and increased public investment. Nevertheless, sustaining high growth will require reforms to enhance economic governance, improve the business climate, and deepen financial intermediation. Fighting corruption will be important for mobilizing donor support.

Tax and public financial management reforms are critical for supporting sustainable growth and making progress toward the Millennium Development Goals (MDGs). On the revenue side, priorities are to reform tax-collection agencies, streamline the tax system, and boost the contribution of the mining sector. On the expenditure side, civil service reform and strengthened controls are needed to direct spending to priority areas. Devolution of revenues, as called for under the constitution, should be phased in, with assistance from the World Bank, to avoid loss of fiscal discipline and inequities among provinces.

Monetary policy will focus on establishing single-digit inflation in a floating exchange rate regime. Financial sector deepening requires strengthening the operations of the central bank and improvements in supervision to reduce bank sector vulnerabilities.

The exchange rate seems appropriate for external sustainability assuming aid flows, debt relief and prudent macroeconomic policies.

A tenuous security situation, adverse terms of trade shocks, and incoherent policies could undermine sustainability and the reform agenda. The new government could mitigate some of the risks by quickly gaining credibility for good economic management. Building broad political support for its economic agenda, including passing a revised budget that conveys a message of macroeconomic moderation, will be key in this regard.

The DRC’s external debt is unsustainable. Along with prudent macroeconomic policies, relief from the HIPC Initiative and MDRI will be needed to make it sustainable.

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Staff Report for the 2007 Article IV Consultation

Informational Annex

Prepared by the African Department

August 14, 2007

  • Relations with the Fund. Describes financial and technical assistance from the Fund and provides information on the safeguards assessment and exchange rate system. Outstanding purchases and loans amounted to SDR 553.47 million (103.8 percent of quota) at end-June 2007.

  • Relations with the World Bank. Describes the World Bank Group program and portfolio.

  • Statistical Issues. Assesses the quality of the statistical data. Weaknesses in a broad range of economic statistics are hampering the analyses of economic developments in the country.


  • Relations with the Fund

  • Relations with the World Bank

  • Statistical Issues

  • Tables

  • 1. Summary of World Bank Financial Assistance

  • 2. Summary of Bank-Fund Collaboration

  • 3. Financial Relations with the World Bank Group—Statement of Loans and Credits

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Joint Fund/World Bank Debt Sustainability Analysis 20071

Prepared by the staffs of the International Monetary Fund and the International Development Association

Approved by Robert Corker and Mark Plant (IMF), and Sudhir Shetty and Vikram Nehru (IDA)

August 14, 2007

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Public Information Notice (PIN) No. 07/116


September 21, 2007

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