Republic of Congo: Third Review Under the Three-Year Arrangement Under the Extended Credit Facility—Informational Annex
Author: International Monetary Fund
Publication Date:
03 Mar 2011
eISBN:
9781455219995
Language:
English
Keywords:
ISCR; CR; reform; salary; sector activity; salary reform; broad money; oil-drilling company; GFS data; public expenditure; liability positions vis-à-vis nonresident; Monetary statistics; Financial statistics; vis-à-vis nonresident
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With the Heavily Indebted Poor Countries (HIPC) completion, Congo’s prospects for achieving sustained growth and poverty reduction have improved. The HIPC completion reduced debt service obligations and increased the resilience of external debt indicators to shocks. Non-oil revenue is improved through broadening the tax base and improving the design of the tax system. The objectives of the poverty reduction strategy (PRS) and fiscal sustainability would require lasting gains in non-oil revenue collection. IMF staff welcomes the authority’s good faith efforts to obtain comparable treatment from all remaining commercial creditors.

Abstract

With the Heavily Indebted Poor Countries (HIPC) completion, Congo’s prospects for achieving sustained growth and poverty reduction have improved. The HIPC completion reduced debt service obligations and increased the resilience of external debt indicators to shocks. Non-oil revenue is improved through broadening the tax base and improving the design of the tax system. The objectives of the poverty reduction strategy (PRS) and fiscal sustainability would require lasting gains in non-oil revenue collection. IMF staff welcomes the authority’s good faith efforts to obtain comparable treatment from all remaining commercial creditors.

Annex I—Republic of Congo: Relations with the Fund

(As of April 30, 2010)

I. Membership Status: Joined: 07/10/1963; Article VIII

II. General Resources Account:

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III. SDR Dedpartment:

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IV. Outstanding Purchases and Loans:

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V. Latest Financial Arrangements:

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Formerly PRGF

VI. Projected Payments to Fund: (without HIPC assistance)

(SDR million; based on existing use of resources and present holdings of SDRS):

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VII. Implementation of HIPC Initiative:

The Republic of Congo reached the completion point under the enhanced HIPC Initiative in January 2010.

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II. Debt Relief by Facility (SDR Million)

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IX. Safeguards Assessments:

The Bank of the Central African States (BEAC) is the regional central bank of the Central African States. The most recent safeguards assessment of the BEAC was completed on July 6, 2009. The findings of this assessment indicate that implementation of previous safeguards recommendations on financial reporting, internal audit, and internal control has been limited, and that the changing risk profile of the BEAC foreign exchange holdings requires further actions to strengthen safeguards at the BEAC. Subsequent to revelation of Paris office fraud, a series of initial measures and longer term safeguard measures were agreed between IMF and BEAC in order to continue with country programs. In December 2009, BEAC adopted an action plan with the aim of reforming its own governance, and strengthening key safeguards. A number of special audits are being conducted as well as part of this action plan.

X. Exchange Rate Arrangement:

Congo’s currency is the CFA franc, which is pegged to the Euro at a fixed rate of CFAF 655.957 = Euro 1. Congo does not impose any restrictions on the making of payments and transfers for current international transactions.

XI. Article IV Consultations:

Consultations with Congo are on a 24-month cycle, based on the Board decision on consultation cycles in program countries. The 2008 consultation discussions and request for a new three-year Poverty Reduction and Growth Facility (PRGF) arrangement were held in Brazzaville on May 21–30 and August 21–27, 2008. The staff report (www.imf.org) was considered by the Executive Board on December 8, 2008.

XI. FSAP Participation: N/A.

XII. Technical Assistance:

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XIII. Resident Representative:

The resident representative, Mr. Oscar Edgardo Melhado Orellana, took up his assignment in September 2009.

Annex II—Republic of Congo: JMAP Implementation Matrix

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Annex III—Statistical Issues

1. Data provision has some shortcomings, but is broadly adequate for surveillance purposes. In the context of surveillance, the limited statistics coverage and long delays in the provision of national accounts and balance of payments statistics are particularly problematic. The statistical infrastructure is being rebuilt after the civil strife of the late 90’s, during which administrative infrastructure suffered severe damage and many records were lost. Since October 2001, an STA multisector statistics advisor (MSA) has been assisting the authorities with the macroeconomic statistics.

2. A STA multi-sector mission in May 2002 conducted an assessment of the statistical system. The mission’s general finding was that macroeconomic statistics were weak and suffered from the absence of a national statistical program and shortages of financial, physical, and human resources. It recommended measures for improvement, which were being followed up by the statistical advisor up to end-2008 and currently through technical assistance by AFRITAC Central. Some important steps have been achieved in the implementation of the recommendations, including work to revise the national accounts and move to the SNA93 system of accounts. In addition, the authorities adopted recently a new statistical framework law, which aims at reorganizing the institutional set-up for collection, treatment and analysis of statistical information, and coordination across central ministries. For operationalizing the law, a new strategy for developing statistical capacity has been launched, with support of development partners.

3. The Republic of Congo participates in the General Data Dissemination System (GDDS) since November 5, 2003. However, the metadata posted on the Fund’s Dissemination Standards Bulletin Board (DSBB) has not been updated or certified since 2003.

Real sector statistics

4. National accounts data is weak, with inconsistencies, both internally and with balance of payments statistics. Estimates for the informal sector are based on information that dates back to 1978. The Directorate General of Statistics (DGS) of the Ministry of Finance (MoF) provides Fund missions with a breakdown of GDP by expenditures and sectors, both in nominal and real terms. In the framework of moving to the SNA93 system of accounts, the DGS completed the national accounts estimates for 2005 (the new base year) and for 2006, with the assistance of the resident statistical expert and Central AFRITAC. Authorities are currently working with the Central AFRITAC to revise the national accounts’ estimates back to 2000 and up to 2008.

5. Annual data on employment in the central government are available from the MoF, but are not consistent with data from the civil service roster of the Ministry of the Civil Service. As part of the structural reforms undertaken in the context of the post-conflict program, the government completed an audit of public service employees, but the two civil service’s databases are yet to be unified. Data on employment in the private sector are not available.

6. Movements in the prices of commodities consumed by households are recorded for the capital city of Brazzaville (weights for 1977 and price reference period of December 1977) and for Pointe Noire (price reference period of January 1996 and weights for 1989)—the second largest city. Weights no longer reflect current household consumption patterns. Data are compiled on a monthly basis. The authorities intend to harmonize their CPI measure with that of other countries in the Central African Economic and Monetary Community (CEMAC).

Government finance statistics

7. Government finance statistics (GFS) has benefited from recent efforts to increase the comprehensiveness of the data through the adoption of systematic compilation practices. The increased interagency cooperation is in line with the recommendations of the May 2002 multisector mission, which recommended that systematic procedures be established for the compilation of government finance statistics, based, to the extent possible, on a unified set of accounting and administrative records using the GFSM 2001 classifications.

8. The Republic of Congo has reported (in September 2008) GFS data to STA for fiscal years 2004 and 2005 using the GFSM 2001 template—data for 2006 and 2007 has experienced delays. High-frequency fiscal data has not yet been reported for publication in IFS. The compilation of GFS statistics to be reported to the Fund should be carried out in close cooperation with the division in charge of TOFE statistics.

9. Progress is underway to address these shortcomings. In February/March 2003, a FAD follow-up mission found that most of the recommendations of the 2001 FAD mission on expenditure management, in particular with regard to the centralization of all government revenue and execution of public expenditure through the budget, are being implemented, and steps have been taken to computerize expenditure chain accounting.

10. The Caisse Congolaise d’Amortissement (CCA) produces comprehensive data on the outstanding stock of external public debt, including arrears and their composition, together with detailed projections on debt service due. These data are provided to Fund missions. However, the debt-stock data cannot be reconciled with flow data in the balance of payments. The CCA also produces domestic debt data. Concerns still exist with regard to the reconciliation of fiscal and monetary statistics.

11. There is no centralized, comprehensive database on the operations of public enterprises. However, some information has been made available to Fund missions by individual enterprises. TOFE compilers do not have access to relevant financial statements of the Société Nationale des Pétroles Congolais (SNPC), which carries out several operations on behalf of the government (notably in the oil sector).

Monetary and financial statistics

12. The Bank of Central African States (BEAC) regularly reports monetary, interest rates, and exchange rate statistics for publication in IFS, but delays occur sometimes in the submission of data to STA. The accuracy of national monetary statistics may be affected by large cross-border movements of BEAC issued banknotes among CEMAC member countries. However, the Republic of Congo is moderately affected by such movements: 6.2 percent of banknotes issued in the Republic of Congo by the BEAC national directorate circulate in Cameroon and 1.2 percent in Gabon, while currency in circulation in the Republic of Congo includes 2.3 percent of banknotes from Cameroon and 3.2 percent from Gabon. The magnitude of banknote movements between the Republic of Congo and CEMAC member countries other than Cameroon and Gabon is very small.

13. In this regard, the BEAC started in mid-2007 a project to migrate monetary statistics of member countries of the CEMAC to the methodology in the Monetary and Financial Statistics Manual (MFSM). As a part of this project, a regional workshop was organized by the BEAC in December 2007 to finalize the mapping of source data from commercial banks to the MFSM concepts and framework. STA participated in this workshop to provide guidance and advice. Submission of data by the BEAC using the standardized report forms is pending.

External sector statistics

14. As in other CEMAC countries, the national agency of the BEAC is responsible for the collection and the dissemination of balance of payments statistics. The balance of payments statistics are prepared on an annual basis while the compilation system has been specifically designed to produce quarterly data. Since 1995, data are being prepared using the Balance of Payments Manual, Fifth Edition. The BEAC provides annual estimates on exports and imports of goods and services and on capital flows other than public debt. Balance of payments data for 1995 through 2005 are published in the Fund’s International Financial Statistics (IFS), and STA is working with the authorities in updating the data series.

15. In May 2002, a technical assistance mission found the compilation system and procedures to be conceptually sound but flawed in their application due to the absence of documented sources and methods, understaffing, and insufficient training. This situation resulted in significant delays in the production of balance of payments statistics and, in general, poor monitoring of the quality of the input data from respondents. Furthermore, the opacity surrounding certain transactions in the oil sector introduces an extra layer of imprecision. In addition, net investment flows are overestimated by significant unrecorded disinvestment operations that are part of the tax regime arrangements obtained by nonresident oil-drilling companies. In February 2007, a follow-up STA balance of payments statistics mission made a number of recommendations aimed at improving institutional arrangements for balance of payments statistics compilation and validation. Progress in this regard has been slow, consequently delaying the process for finalizing BOP data for 2005–08.

Republic of Congo: Table of Common Indicators Required for Surveillance

As of May 10, 2010

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Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

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

Foreign, domestic bank, and domestic non-bank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

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

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).

1

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 amounts can not be added.

2

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.

3

The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the 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.

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Cover IMF Staff Country Reports
Republic of Congo: Third Review Under the Three-Year Arrangement Under the Extended Credit Facility—Staff Report; Staff Supplements; and Press Release on the Executive Board Discussion
Author: International Monetary Fund
Volume/Issue:
Volume 2011: Issue 061
Publisher:
International Monetary Fund
ISBN:
9781455219995
ISSN:
1934-7685
Pages:
45
DOI:
https://doi.org/10.5089/9781455219995.002