Democratic Republic of the Congo: Staff Report for the 2012 Article IV Consultation—Informational Annex
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International Monetary Fund. African Dept.
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Economic performance in the Democratic Republic of the Congo (DRC) has improved markedly. To safeguard the fiscal position, the government has to rigorously monitor budget execution and reduce nondiscretionary spending. The current monetary and floating exchange rate regime should be maintained. Recent efforts to shore up financial stability and develop the banking sector give opportunities for closer regional and global financial integration. Institutional weaknesses, the business environment, and establishing a strong foundation for the exploitation and development of DRC’s natural resources will be critical.

Abstract

Economic performance in the Democratic Republic of the Congo (DRC) has improved markedly. To safeguard the fiscal position, the government has to rigorously monitor budget execution and reduce nondiscretionary spending. The current monetary and floating exchange rate regime should be maintained. Recent efforts to shore up financial stability and develop the banking sector give opportunities for closer regional and global financial integration. Institutional weaknesses, the business environment, and establishing a strong foundation for the exploitation and development of DRC’s natural resources will be critical.

I. Relations with the IMF

As of July 31, 2012

Membership Status: Joined September 28, 1963; Article VIII

General Resources Account:

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SDR Department

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Outstanding Purchases and Loans:

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Latest Financial Arrangements:

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Projected Payments to Fund:2

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

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Implementation of HIPC Initiative:

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Implementation of MDRI Assistance:

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Exchange Rate Arrangement:

The currency of the Democratic Republic of the Congo (DRC) is the Congo franc. The de jure exchange rate arrangement is floating, although the IMF classifies the Congo franc as an “other managed arrangement”. At end-June 2012, the rate was US$1=CF 919.32.

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 exchange rate 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 a bilateral payments agreement with Zimbabwe.

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.

Safeguards Assessment:

An update safeguards assessment of the Banque Centrale du Congo (BCC) was completed in April 2010, which 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, and the absence of an independently defined financing reporting framework continued to impair transparency. The BCC agreed broadly with the priority recommendations of the assessment, and has 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. Additionally, the BCC believes that they are still on target to issue their 2012 financial statements in accordance with IFRS, although the transition process has been protracted.

Technical Assistance:

STA

FY 2007 – Real sector statistics

FY 2008 – Real sector statistics

FY 2009 – National accounts

FY 2010 – Monetary statistics and national accounts

FY 2011 – Monetary statistics and national accounts

FY 2012 – Monetary statistics, national accounts and balance of payments.

MCM

Capacity building assistance to the central bank

FY 2012 – One mission (TA needs assessment)

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

FY 2012 – Two short visits (of which one on currency reform and handling)

Restructuring and reorganization of the central bank

FY 2009 – One short visit

FY 2010 – One short visit

FY 2011 – Four short visits

FY 2012 – One mission.

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

FY 2012 – One mission.

LEG

FY 2012 – Two missions.

FAD

Public financial management

FY 2007 – Short visit

FY 2009 – Short visit

FY 2010 – Short visit

FY 2011 – Short visit

FY 2012 – One short visit (MNRW TTF diagnostic)

Revenue administration

FY 2005 – One short visit

FY 2006 – One short visit

FY 2007 – One short visit

FY 2008 – One short visit

FY 2009 – One short visit

FY 2011 – One short visit (VAT diagnostics)

FY2012 – One short visit (MNRW TTF diagnostic)

Fiscal decentralization

FY 2005 – Short visit

Tax Policy

FY 2012 – One short visit (MNRW TTF diagnostic)

AFRITAC Central

Public financial management

FY 2009 – Four missions

FY 2010 – Three missions

FY 2011 – One mission

FY 2012 – Five missions and one short visit

Tax administration

FY 2008 – One mission

FY 2009 – Two missions

FY 2010 – Three missions

FY 2011 – Two missions

FY 2012 – One mission Bank supervision

FY 2008 – Three missions

FY 2009 – Three missions

FY 2010 – Three missions

FY 2011 – Two missions and one short visit

FY 2012 – Five missions Public debt

FY 2008 – One mission and one short visit

FY 2009 – One short visit

FY 2010 – Three missions Statistics

FY 2009 – One short visit

FY 2010 – Two missions

FY 2011 – One mission and one short visit

National Accounts

FY 2009 – One short visit

FY 2010– Two missions

FY 2011 –One mission and one short visit

FY 2012 – One mission

Long-term Resident Experts:

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

II. JMAP Implementation Matrix

As of July 10, 2012

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

2. The World Bank’s FY13 work program entails additional financing for projects in the transport, health and governance sector as well as two new projects; (i) a civil service rejuvenation project and (ii) a growth poles 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 and an Art. IV consultation.

4. Both institutions are supporting an FSAP that could take place during FY14.

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III. Statistical Issues

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

(As of July 10, 2012)

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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. In light of recent misreporting on external arrears, the authorities have agreed to henceforth report this data on a monthly basis.

Includes external gross financial asset and libility positions vis-à-vis nonresidents. Due to lack of capacity, this data is not provided by the DRC.

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

1

Formerly PRGF.

2

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

3

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.

4

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.

5

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.

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Democratic Republic of the Congo: 2012 Article IV Consultation—Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for the Democratic Republic of the Congo
Author:
International Monetary Fund. African Dept.