Democratic Republic of the Congo—First Review Under the Three-Year Arrangement Under the Extended Credit Facility and Financing Assurances Review

Congo’s economic program aims to enhance macroeconomic stability and advance reforms to bolster economic management and improve the supply response of the economy. Progress in implementing the program has been affected negatively by the continuation of conflict. Fiscal policy aims at reducing government recourse to central bank financing. Structural reforms in revenue mobilization and public financial management (PFM) are critical for achieving the fiscal policy objectives. Pressing ahead with structural reforms is required for higher economic growth. Executive Directors suggest adoption of the Lending into Arrears Policy.

Abstract

Congo’s economic program aims to enhance macroeconomic stability and advance reforms to bolster economic management and improve the supply response of the economy. Progress in implementing the program has been affected negatively by the continuation of conflict. Fiscal policy aims at reducing government recourse to central bank financing. Structural reforms in revenue mobilization and public financial management (PFM) are critical for achieving the fiscal policy objectives. Pressing ahead with structural reforms is required for higher economic growth. Executive Directors suggest adoption of the Lending into Arrears Policy.

Democratic Republic of the Congo Relations with the Fund

(As of May 31, 2010)

I. Membership Status: Joined September 28, 1963; Article VIII

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans:

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V. Latest Financial Arrangements:

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VI. Projected Payments to Fund: (SDR million; based on current use of resources and present holdings of SDRs):

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VII. Implementation of HIPC Initiative:

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VIII. Implementation of MDRI Assistance: Not applicable

IX. Exchange Rate Arrangement:

The currency of the Democratic Republic of the Congo is the Congo franc which, since May 26, 2001, has been freely floating. On June 15, 2010, the rate was US$1=CF 901.

Effective February 10, 2003, the DRC accepted the obligations of Article VIII, Sections 2 (a), 3, and 4, of the Fund’s Articles of Agreement; however, the DRC maintains measures that give rise to one restriction and one multiple currency practice subject to Fund approval. The exchange restriction involves an outstanding net debt position against other contracting members under the inoperative regional payments agreement with the Economic Community of the Great Lakes Countries. The multiple currency practice relates to a fixed exchange rate set quarterly applying to transactions through the bilateral payments agreement with Zimbabwe.

X. Last Article IV Consultation:

(a) Consultations with the Democratic Republic of the Congo are held in accordance with the provisions of the decision on consultation cycles approved on July 15, 2002.

(b) The last Article IV consultation was concluded by the Executive Board on December11, 2009.

XI. Safeguards Assessment:

An update safeguards assessment of the central bank (BCC) was completed in April 2010. It found that most of 2008 recommendations have been implemented. However, significant risks remain. The central bank lacks independence from the government and its recapitalization requires urgent action. The BCC authorities agreed broadly with the priority recommendations of the assessment and some progress towards their implementation has been made.

X. Technical Assistance:

STA

FY 2004 – Multisector statistics

FY 2010 – Monetary statistics

MCM

Capacity building assistance to the central bank

Strengthening capacity in Anti-Money Laundering/Combating Financial Terrorism (AML/CFT)

FY 2005 – One short visit

FY 2006 – Two short visits

Strengthening capacity in monetary policy implementation, exchange operations, and liquidity management

FY 2005 – Three short visits

FY 2006 – Two short visits

FY 2007 – Seven short visits

FY 2008 – Three short visits

FY 2009 – One short visit

Restructuring and reorganization of the central bank

FY 2009 – One short visit

FY 2010 – One short visit

Strengthening capacity in banking supervision and financial sector development

FY 2005 – One short visit on bank supervision and regulation

FY 2008 – Two short visits on bank supervision and regulation

FY 2010 – Three short visits on bank supervision and regulation

FY 2006 – One short visit on internal audit

FY 2008 – One short visit on internal audit

FY 2007 – Action plan for developing the financial system

FY 2008 – One short visit on TA assessment

FAD

Public financial management

FY 2007 – Short visit

FY 2009 – Short visit

Revenue administration

FY 2004 – Two short visits

FY 2005 – One short visit

FY 2006 – One short visit

FY 2007 – One short visit

FY 2007 – One short visit

FY 2009 – One short visit

Fiscal decentralization

FY 2005 – Short visit

XIII. Long-term Resident Experts:

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XIV. Resident Representative: Mr. Jahjah assumed his duties as Resident Representative in January 2009.

Democratic Republic of the Congo: Relations with the World Bank Group Joint Managerial Action Plan (JMAP)

(As of June 1, 2010)

  1. The IMF and World Bank Democratic Republic of Congo teams discussed a joint managerial action plan under this initiative.

  2. The World Bank’s work program entails moving forward in FY11 with a Development Policy Operation (DPO) to provide US$100 million in budget support, and a Country Economic Memorandum (CEM) that will focus on constraints to growth.

  3. The IMF’s work program entails three year arrangement under the Extended Credit Facility (ECF) approved by the IMF Executive Board on December 11, 2009.

  4. Both institutions are supporting an FSAP that will take place during FY11.

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Democratic Republic of the Congo: Statistical Issues Appendix

(As of May 31, 2010)

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The Democratic Republic of the Congo: Table of Common Indicators Required for Surveillance

(As of May 31, 2010)
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Any reserves assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the national values of financial derivatives to pay and receive foreign currency, including those linked to a foreign curreny but settled by other means.

Both market-based and officially-determined, including discount rates, money markets rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

Including currency and maturity composition.

Includes external gross financial asset and libility positions vis-à-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Irregular (I), Not available (NA).