Republic of Congo: Second Review Under the Three-Year Extended Credit Facility Arrangement, Requests for Modification and Waivers of Nonobservanceof Performance Criteria, and Financing Assurances Review—Supplementary Information, and Supplementary Letter of Intent
Author:
International Monetary Fund. African Dept.
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Publication Date:
15 Feb 2023
eISBN:
9798400231926
ISBN:
9798400231926
Language:
English
Keywords:
arrears repayment; short-term debt; GDP deflator; debt ratio; debt service statistic; Oil prices; Arrears; Debt service; Global
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REPUBLIC OF CONGO

Abstract

REPUBLIC OF CONGO

Copyright Page

REPUBLIC OF CONGO

SECOND REVIEW UNDER THE THREE-YEAR EXTENDED CREDIT FACILITY ARRANGEMENT, REQUESTS FOR MODIFICATION AND WAIVERS OF NONOBSERVANCEOF PERFORMANCE CRITERIA, AND FINANCING ASSURANCES REVIEW—SUPPLEMENTARY INFORMATION, AND SUPPLEMENTARY LETTER OF INTENT

February 1,2023

Approved By

Vitaliy Kramarenko (AFR) and Geremia Palomba (SPR)

1. The Republic of Congo recently temporarily accumulated and have fully paid arrears on external debt owed to Belgium and France since circulation to the Board of the staff report for the second review under the Extended Credit Facility Arrangement (ECF). Arrears in the amount of $3.5 million and $6.0 million were accumulated to Belgium as of January 14 and 15, 2023 and were paid on January 20, 2023. Arrears in the amount of $10.3 million were accumulated to France as of January 15, 2023 and were paid on January 20, 2023. These arrears arose from capacity constraints faced by the Caisse Conglaise d’Amortissement (CCA), specifically errors made by overburdened staff. To address these constraints and prevent future arrears, the structure of the CCA is in the process of being reorganized in line with recent IMF technical assistance (TA) recommendations. The reorganization is expected to reduce the burden on CCA staff and facilitate hiring additional qualified staff. Decrees required to implement the new structure of the CCA have been drafted with support of IMF TA. The Ministry of Finance and the Prime Minister’s office are working towards quickly adopting these decrees.

2. Staff supports the authorities’ request for a waiver of non-observance of the continuous PC on the non-accumulation of new arrears on external debt on the basis of the temporary nature of the breach and corrective measures put in place by the authorities. The temporary accumulation of these arrears resulted in breach of the continuous PC which places a zero ceiling on the accumulation of new arrears on external debt contracted or guaranteed by the central government. Corrective actions have been taken by the authorities through quick payment of the arrears and ongoing reorganization of the CCA, supported by IMF TA that will prevent the reoccurrence of this type of error. In light of these corrective actions, staff assesses that the breach has been corrected and staff believes that this issue does not alter the overall assessment conducted in the staff report, including the authorities’ continued commitment to the program. Based on information provided by the authorities, there are no other external arrears at this moment.

3. The PC table attached to the supplemental LOI will replace “Table 1. Republic of Congo: Quantitative Performance Criteria (PC) and Indicative Targets (IT), 2022–23” attached to the original LOI and MEFP.

4. A revised proposed decision is attached to this supplement.

Appendix I. Supplementary Letter of Intent

February 1, 2023

Ms. Kristalina Georgieva

Managing Director

International Monetary Fund

700 19th Street, N.W.

Washington, D.C. 20431

U.SA

Madam Managing Director:

1. In addition to our Letter of Intent dated December 14, 2022, we wish to provide additional information on external arrears of $19.8 million (0.2 percent of GDP) that were temporarily accumulated to two of our official creditors. Arrears in the amount of $3.5 million and $6.0 million were accumulated to Belgium as of January 14 and 15, 2023 and were paid on January 20, 2023. Arrears in the amount of $10.3 million were accumulated to France as of January 15, 2023 and were paid on January 20, 2023. The debt service to Belgium was originally due on December 14 and 15, 2022 and to France on December 15, 2022. Once the delayed payments exceeded the 30-day grace period provided for in the TMU, they became arrears for program purposes and constituted non-observance of the continuous PC in the TMU. Upon notification by the respective creditors, we immediately paid these arrears.

2. The situation has been corrected with rapid payment of these arrears and we are addressing the capacity constraints faced by the Caisse Conglaise d’Amortissement (CCA), specifically overburdened staff, that led to these arrears. The structure of the CCA is in the process of being reorganized in line with recent IMF technical assistance (TA) recommendations. The reorganization is expected to reduce the burden on CCA staff and facilitate hiring additional qualified staff. Decrees required to implement the new structure of the CCA have been drafted with support of IMF TA. The Ministry of Finance and the Prime Minister’s office are working towards quickly adopting these decrees. We wish to assure you that with the new structure of the CCA, which is part of on-going improvements in our debt management capacity with the support of IMF TA such arrears will not occur in the future and we request a waiver for the non-observance of this continuous Performance Criteria.

3. The government stands ready to take any additional measures that may be necessary to further improve debt management, a key pillar of the program. We will consult with the IMF on the adoption of such measures in advance of any revision of the policies contained in the MEFP, in accordance with the Fund’s policies on such consultations.

Sincerely,

/s/

Jean-Baptiste Ondaye

Minister of Finance and Economy

Brazzaville, Republic of Congo

Table 1.

Republic of Congo: Quantitative Performance Criteria (PC) and Indicative Targets (IT), 2022–23

(Billions of CFA francs; cumulative from the beginning of the year, except where otherwise indicated)1

article image

Quantitative Performance Criteria and Indicative Targets are defined in the TMU. “Program” columns represent the PCs and ITs set at the time of the first review of the ECF arrangement; and “Modified Program” represent the modifications to these PCs and ITs proposed during the current second review of the ECF arrangement.

Defined as non-oil domestic revenue minus total expenditures excluding interest payments, transfers paid with crude oil, and foreign-financed investment

These ceilings are set to zero and to be respected continuously from the date of program approval.

Excluding all sources of budgetary support identified in the program.

Excluding all types of financing mentioned in paragragh 10 of the TMU.

Subject to the exception allowed in paragraph 11 of the TMU.

Cumulative from the date of program approval and is on a contractual basis in accordance with the IMF’s debt limits policy: https://www.imf.org/-/media/Files/Publications/PP/2021/English/PPEA2021037.ashx.

Excluding oil barter transactions for the payment of transfers.

As defined in paragraphs 18 and 22 of the TMU.

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Cover IMF Staff Country Reports
Republic of Congo: Second Review under the Three-year Extended Credit Facility Arrangement, Requests for Modification and Waivers of Nonobservance of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Congo
Author:
International Monetary Fund. African Dept.
Volume/Issue:
Volume 2023: Issue 089
Publisher:
International Monetary Fund
ISBN:
9798400231926
ISSN:
1934-7685
Pages:
124
DOI:
https://doi.org/10.5089/9798400231926.002