- The IMF Executive Board completed the sixth and final review of the arrangement under the Extended Credit Facility, allowing for an immediate disbursement of SDR 32.4 million (about US$43 million).
- Economic recovery continued at a moderate pace amid challenging domestic and external conditions, while inflationary pressures have eased. Program performance was mixed in the sixth review, with structural reform implementation experiencing persistent delays.
- Reinvigorated reform implementation to enhance public financial and debt management, governance, and transparency will be critical to creating the fiscal space for development spending and attaining higher, more resilient, and inclusive growth.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) today completed the sixth and final review of the Republic of Congo's arrangement under the Extended Credit Facility (ECF), which was approved on January 21, 2022 . The completion of the review allows for the immediate disbursement of SDR 32.4 million (about US$43 million), bringing total disbursements under the ECF Arrangement to SDR 324 million (about US$430 million; 200 percent of quota), and thereby concluding the ECF Arrangement. This financing from the IMF will continue to help the authorities implement their development policies, maintain macroeconomic stability, and bolster economic recovery against the backdrop of tighter financial conditions.
Program performance was mixed in the sixth review with lingering delays in the implementation of some structural reforms. The authorities addressed the breach of performance criteria related to external debt service, new external non-concessional debt, and newly contracted debt guaranteed by natural resources. Waivers for non-observance were granted, given the corrective actions taken. These include the full clearance of all newly accumulated external arrears, additional fiscal tightening to improve the treasury's cashflow, and steps to strengthen the timely exchange of information on debt matters. Reform benchmarks on the social safety nets spending and enactment of hydrocarbon-related VAT laws were implemented with delay, while more efforts are needed to ensure the full operationalization of the Public Financial Management Information System (SIGFIP).
Fiscal policy is focused on reducing fragilities while enhancing debt sustainability. Protracted liquidity tensions led the authorities to undertake a domestic debt reprofiling operation aimed at extending the maturities of treasury obligations. Meanwhile, the fiscal deficit shrank more than anticipated in 2024 owing to under-execution of the wage bill, investment, and social spending. The approved 2025 budget seeks to maintain the momentum of fiscal consolidation, while prioritizing critical development and social expenditure. Upgrading domestic resource mobilization, including by advancing energy price reforms and boosting non-hydrocarbon revenue collection, remains crucial to addressing liquidity pressures amid high public debt.
Renewed efforts are needed to sustain the structural reform momentum. Improved management of public finances, supported by the full implementation of SIGFIP, will facilitate larger, more effective, and higher quality development spending. Broader governance reforms, encompassing anti-corruption and transparency, will also be critical for improving the business environment.
Congo's economic recovery continues at a moderate pace. Growth is expected to pick up over the next two years, approaching subsequently a range of 3.4 to 3.8 percent, while easing inflation will gradually return to the region's 3 percent target. The country's current account surplus is projected to continue dwindling, before turning into a deficit, partly reflecting the projected decline in oil prices and growing imports as economic diversification picks up.
Accelerating the implementation of policies and reforms beyond the conclusion of this ECF Arrangement will further help reduce fragilities and place the Republic of Congo on a path of higher, more resilient, and inclusive growth. It will also contribute to regional efforts to preserve external stability for the Central African Economic and Monetary Union (CEMAC).
At the conclusion of the Executive Board's discussion, Mr. Nigel Clarke, Deputy Managing Director, and Acting Chair, made the following statement:
"The Republic of Congo's recovery has firmed up, although at a moderated speed, supported by resilient non-hydrocarbon growth. Nevertheless, downside risks dominate, including from volatile oil prices, the buildup of domestic arrears, challenges to debt and liquidity management, and persistent funding pressures. Social tensions amid recent wage and pension arrears may complicate reform implementation ahead. As continued energy outages drive up production costs and the expiration of the resilience plan implied the removal of tax exemptions, inflation is expected to rebound to almost 4 percent in 2025, before converging back to the regional target of 3 percent. Against the backdrop of global uncertainties and funding challenges, it would be important to sustain efforts to maintain macroeconomic stability and debt sustainability, while pursuing higher, more resilient, and inclusive growth.
"Program performance was mixed. All end-June 2024 quantitative performance criteria were met, but the continuous zero ceiling performance criteria on new external arrears, new external non-concessional debt and newly contracted debt guaranteed by natural resources were breached. Progress in advancing structural reforms has continued, albeit with delays. Decisive corrective actions have been taken to strengthen program performance.
"The authorities are encouraged to maintain fiscal consolidation efforts. Continued spending discipline, a broadening of the tax base, and a scaling down of tax expenditures should gradually establish the fiscal space needed for stepping up social and development spending. Progress in reforming energy subsidies together with enhanced social assistance targeted is also key.
"Strengthened debt and liquidity management is paramount to ensuring debt sustainability, avoiding debt service delays, and improving the effectiveness of public spending. Further enhancing the coordination of government agencies on issues related to debt management and increasing transparency on public debt remain essential.
"Much-needed economic diversification, founded in private investment, will hinge on effective and sustained implementation of structural and governance reforms. Improving transparency of public finances and the hydrocarbon sector, and further operationalizing the anti-corruption architecture, including improvements to the AML/CFT framework, would be pivotal. Boosting financial inclusion and stepping up state-owned enterprise reforms, and adapting to risks emanating from climate change will, over the medium term, support inclusive and resilient growth."
