Democratic Republic Of The Congo: Second Review of the Three-Year Arrangement Under the Extended Credit Facility and Financing Assurances Review Informational Annex

The IMF’s Executive Board completed the first review under the Extended Credit Facility (ECF) arrangement in June 2010 and decided that the Democratic Republic of Congo (DRC) had reached the completion point under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative. In 2010, an improvement in global economic conditions supported strong macroeconomic performance; however, weaknesses in the financial sector were also exposed. The authorities recognized the importance of strengthening the independence and effectiveness of the central bank to sustain low and stable inflation.

Abstract

The IMF’s Executive Board completed the first review under the Extended Credit Facility (ECF) arrangement in June 2010 and decided that the Democratic Republic of Congo (DRC) had reached the completion point under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative. In 2010, an improvement in global economic conditions supported strong macroeconomic performance; however, weaknesses in the financial sector were also exposed. The authorities recognized the importance of strengthening the independence and effectiveness of the central bank to sustain low and stable inflation.

Annex Relations with the Fund

(As of December 31, 2010)

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

II. General Resources Account:

article image

III. SDR Department:

article image

IV. outstanding purchases and Loans:

article image

V. Latest Financial Arrangements:

article image

VI. Projected Payments to Fund:1

(SDR million; based on current use of resources and present holdings of SDRs):

article image

VII. Implementation of HIPC Initiative:

article image

VIII. Implementation of MDRI Assistance:

article image

II. Debt Relief by Facility (SDR Million)

article image

IX. Exchange Rate Arrangement:

The currency of the Democratic Republic of the Congo (DRC) is the Congo franc. The de facto exchange rate arrangement is classified as floating. At end-December 2010, the rate was US$1=CF 915.13.

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:

Consultations with the DRC are held in accordance with the provisions of the 2010 Decision on consultation cycles approved in September 2010. The last Article IV consultation was concluded by the Executive Board on December 11, 2009.

XI. Safeguards Assessment:

An update safeguards assessment of the central bank (BCC) was completed in April 2010. It found that while most of 2008 recommendations had been implemented significant risks remained. The BCC continues to lack autonomy from the government and is in need of recapitalization. Furthermore, the absence of a benchmark financing reporting framework continues to impair transparency. The BCC and the authorities agreed broadly with the priority recommendations of the assessment, and since initiated several reforms. In December 2010 the government submitted to Parliament an amendment to the central bank law for the recapitalization of the BCC, which is now scheduled for March 2011. Also, in 2011 the BCC plans to release its financial statements for the first time, consistent with IFRS. The status of safeguards recommendations will continue to be monitored in the context of the program.

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 2006 — One short visit on internal audit

FY 2007 — Action plan for developing the financial system

FY 2008 — One short visit on TA assessment

FY 2008 — Two short visits on bank supervision and regulation

FY 2008 — One short visit on internal audit

FY 2010 — Three short visits on bank supervision and regulation

FY 2011 — Two short visits on bank supervision and regulation

FAD

Public financial management

FY 2007 — Short visit

FY 2009 — Short visit

FY 2010 — Short visit

FY 2011 — 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:

article image

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

Annex II JMAP Implementation Matrix

(As of December 13, 2010)

1. The IMF and World Bank teams discussed a joint managerial action plan under the JMAP initiative.

2. The World Bank’s work program entails moving forward in FY11 with a Country Economic Memorandum (CEM) that will focus on constraints to growth and additional financing for the financial and private sector development project.

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

4. Both institutions are supporting an FSAP that will take place during FY12.

article image

Annex III Statistical Issues

article image

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

(As of December 31, 2010)

article image

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).

1

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

2

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two numbers can not be added.

3

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

4

The MDRI provides 100 percent debt relief to eligible countries that qualified for the assistance. Grant assistance from MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

Democratic Republic of the Congo: Second Review Under the Three-Year Arrangement Under the Extended Credit Facility and Financing Assurances Review—Staff Report; Staff Supplement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for the Democratic Republic of the Congo
Author: International Monetary Fund