Democratic Republic Of The Congo: Third Review Under the Three-Year Arrangement Under the Extended Credit Facility, Financing Assurances Review, and Request for Modification of Performance Criteria Informational Annex

Satisfactory policy implementation continues in the program under challenging conditions, but the uncertain economic, social, and political environment will test this commitment. The program is flexible to accommodate a partial pass-through of higher world oil prices to domestic fuel prices and further pro-poor spending, but ongoing fiscal discipline will be essential to achieve the program’s fiscal objectives. The implementation of revenue-enhancing measures will require political will. Executive Directors welcome the efforts to implement the broad range of reforms in extractive industries.

Abstract

Satisfactory policy implementation continues in the program under challenging conditions, but the uncertain economic, social, and political environment will test this commitment. The program is flexible to accommodate a partial pass-through of higher world oil prices to domestic fuel prices and further pro-poor spending, but ongoing fiscal discipline will be essential to achieve the program’s fiscal objectives. The implementation of revenue-enhancing measures will require political will. Executive Directors welcome the efforts to implement the broad range of reforms in extractive industries.

Annex I Relations with the Fund

(As of March 31, 2011)

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:1

(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:

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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-March 2011, the rate was US$1=CF 921.65.

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 the 2008 recommendations had been implemented significant risks remained. The BCC continued to lack autonomy from the government and was in need of recapitalization. Furthermore, the absence of a benchmark reporting framework continued to impair transparency. The BCC and the authorities agreed broadly with the priority recommendations of the assessment, and since initiated important reforms. In March 2011 the Ministry of Finance completed the first phase of the BCC’s recapitalization, bringing its net worth to zero. Also the BCC plans to release its 2011 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

FY 2011 – Three short visits

Restructuring and reorganization of the central bank

FY 2009 – One short visit

FY 2010 – One short visit

FY 2011 – Four short visits

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 – Three short visits

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

FY 2011 – One short visit (VAT diagnostics)

Fiscal decentralization

FY 2005 - Short visit

XIII. Long-term Resident Experts:

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

Annex II JMAP Implementation Matrix

(As of March 23, 2011)

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 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 could take place during FY12.

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Annex III Statistical Issues

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

(As of April 12, 2011)

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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).

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 cannot 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: Third Review of the Three-Year Arrangement Under the Extended Credit Facility, Financing Assurances Review, and Request for Modification of Performance Criteria: Staff Report and Press Release on the Executive Board Discussion
Author: International Monetary Fund