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© 2012 International Monetary Fund
October 2012
IMF Country Report No. 12/283
Republic of Congo: 2012 Article IV Consultation—Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for the Republic of 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 2012 Article IV consultation with the Republic of Congo the following documents have been released and are included in this package:
The staff report for the 2012 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on May 25, 2012, with the officials of the Republic of Congo on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on June 8, 2012. 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.
Informational Annex
A Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its June 27, 2012 discussion of the staff report that concluded the Article IV consultation.
A statement by the Executive Director for the Republic of Congo.
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
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June 8, 2012
KEY ISSUES
Context: The key issue facing Congo is how to use oil and mineral resources effectively in support of inclusive growth. Economic conditions are supportive—macroeconomic stability is in place, the terms of trade are favorable, and the external position is strong. External risks are mitigated by membership in CEMAC, under which all members benefit from the French convertibility guarantee, and large fiscal buffers. Yet, growth has not been inclusive. Over half of the population lives in poverty and a labor skills mismatch results in high unemployment and underemployment, especially among youth. The difficult business climate holds back diversification. On March 4, 2012 a munitions depot exploded in Brazzaville causing death and destruction; near-term policies focus on reconstruction and addressing the humanitarian crisis.
Strengthening fiscal policy: The medium-term orientation of fiscal policy aims to scale up investment expenditure to close the infrastructure gap while saving a portion of oil revenue. This approach is broadly sound, but leaves development and savings objectives vulnerable to oil prices, and needs to be accompanied by strong measures to raise expenditure quality. Implementing a fiscal anchor could help reduce procyclicality of spending.
Raising the inclusiveness of growth: Inclusive growth is multidimensional and coordinated policies are required to address weaknesses in the fiscal framework, the business climate, financial sector development and the labor market. The new National Development Plan 2012–2016 is consistent with raising inclusiveness, and plans are in place to improve the business climate and increase the financial sector’s role in development. Effective implementation is critical to creating a stable environment governed by the rule of law. Labor policies need to improve the quality of education and increase technical training.
Data issues: Despite intensive technical assistance, data continues to suffer shortcomings but is broadly adequate for surveillance.
Approved By
Anne-Marie Gulde-Wolf and Dhaneshwar Ghura
Discussions were held in Brazzaville May 15–25, 2012. The mission team comprised Ms. Baker (head), Ms. Tartari and Mr. Arze del Granado (all AFR) and Mr. Acosta-Ormaechea (FAD). The mission met with President Sassou Nguesso, Minister of Finance Ondongo, the Ministers of Education, Industrial Policy, Labor and Mining, as well as other government officials. The mission was assisted by Mr. Melhado, resident representative, and was joined by Mr. Assimaidou (ED) and Mr. Sidi Buona (OED).
The Republic of Congo is a member of the Central African Economic and Monetary Community (CEMAC). The common currency, the CFA franc, is pegged to the Euro at CFAF 655.957 per Euro.
Contents
CONGO AT THE CROSSROADS
DEVELOPMENTS AND THE CHALLENGES AHEAD
A. Growth has been sustained, but not inclusive
B. Scaling up is justified, but the supplemental budget poses risks to macroeconomic stability and expenditure quality
C. The external position is strong, but competitiveness remains an issue
OUTLOOK AND RISKS
REPORT ON THE POLICY DISCUSSIONS
A. Near-term fiscal policy—addressing the fallout of the explosions
B. Strengthening fiscal policy—anchors and expenditure quality
C. Fostering inclusive growth
STAFF APPRAISAL
TABLES
1. Selected Economic and Financial Indicators, 2008–17
2. Medium Term Balance of Payments, 2008–17
3a. Central Government Operations, 2008–17
3b. Central Government Operations, 2008–17
3c. Statement of Central Government Operations, 2008–17
3d. Integrated Financial Balance Sheet of the Central Government, 2011–13
4. Monetary Survey, 2008–13
5. Banking Sector Financial Soundness Indicators, 2007–11
6. Millenium Development Goals, 1990–2009
BOXES
1. Financial Sector Developments
2. Fiscal Developments and the 2012 Budget
3. External Stability and Competitiveness
ANNEXES
I. Employment in Congo—How to Make the Labor Market and Education System More Supportive of Inclusive Growth?
II. Assessing the Potential Inflationary Impact of the 2012 Supplemental Budget
III. An Approach to Anchoring Fiscal Policy
IV. Public Information Notice
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June 8, 2012
Prepared By
The African Department
(in consultation with other departments)
Contents
I. FUND RELATIONS
II. WORLD BANK - IMF COLLABORATION
III. STATISTICAL ISSUES
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Public Information Notice (PIN) No. 12/74
FOR IMMEDIATE RELEASE
July 10, 2012
International Monetary Fund
700 19th Street, NW
Washington, D. C. 20431 USA
