IMF Mission Statement at the Conclusion of the 2014 Article IV Discussions with the Republic of Congo
BRAZZAVILLE, Republic of the Congo, May 28, 2014/African Press Organization (APO)/ -- An International Monetary Fund (IMF) staff team led by Ms. Dalia Hakura, Mission Chief to the Republic of Congo, visited Brazzaville during May13-26, 2014 to conduct discussions for the Article IV consultations.1 The mission met with the State Minister of Economy, Finance, Planning, Public Portfolio and Integration, Mr. Gilbert Ondongo, Minister at the Presidency in Charge of Territory Planning and Large Projects, Mr. Jean-Jacques Bouya, Deputy Minister in Charge of Planning and Integration, Mr. Raphael Mokoko, Special Advisor to the President, Mr. Denis Gokana, National Director of the Central Bank, Mr. Cedric Ebauh Ondaye, Chairman of the Economic and Financial Commission of the National Assembly, Mr. Maurice Mavoungou, and Chairman of the Economic and Financial Commission of the Senate, Mr. Fila de Saint-Eudes, and other senior officials. The mission also met with representatives of the private sector, civil society, and development partners.
At the conclusion of the mission, Ms. Hakura made the following statement:
“The Republic of Congo's macroeconomic performance continues to be broadly satisfactory. Growth averaged around 3.5 percent in the last three years, in the context of declining oil production due to aging oil fields. The economy is projected to expand by about 6 percent per annum between 2014 and 2019, as a result of increases in oil production and the start of iron ore production. Inflation is easing, aided by lower food prices and real appreciation of the CFA franc. Public investment spending and arrears payments for social benefits and payments to suppliers pushed total cash government spending to about CFAF 2735 billion in 2013 close to the 2012 level when spending was raised in the aftermath of the Mpila ammunitions explosion, and up from CFAF 1865 billion in 2011. Official central bank reserves held at the regional Bank of Central African States (BEAC) declined by CFAF 265 billion to CFAF 2509 billion at the end of 2013. This is equivalent to about 7 months of prospective imports of goods and services. The authorities' favorable sovereign credit rating obtained in 2013 from international rating agencies was recently reaffirmed.
“The country's medium-term prospects are promising provided that significant policy actions are adopted including the efficient implementation of an ambitious public investment program to diversify the economy and make growth more inclusive. Poverty and unemployment remain high. The government budget relies heavily on oil revenue. Therefore, oil price volatility and the exhaustibility of oil reserves could pose risks to macroeconomic stability and the authorities' objective of attaining sustained high inclusive non-oil growth over the medium term. To address these risks, the mission's discussions focused on the need to arrest the growth of government spending and put the economy on a path of fiscal consolidation that targets a gradual decline in the non-oil primary deficit while safeguarding targeted social spending and growth-enhancing capital spending. The Republic of Congo should continue to adhere to a prudent borrowing and expenditure policy to prevent a rapid accumulation of external debt and so as to preserve the hard-won gains in debt sustainability following the Heavily Indebted Poor Countries/Multilateral Debt Relief Initiative (HIPC/MDRI) obtained in 2010.
“For 2014, the mission encouraged the authorities to ensure that adequate measures are taken to meet the targets for non-oil revenue and expenditure in the budget. This will be particularly important in view of spending pressures related to preparations for the 2015 All Africa Games and the 2016 presidential elections. Also, with the aging of existing oil wells, there is considerable uncertainty about oil production and revenues. In this regard, the mission welcomes the authorities' efforts to improve non-oil revenue collection, including from ongoing customs reforms and strengthening of the large-tax-payer office. Efforts should be taken to reduce the use of tax exemptions. Ideally, a supplementary budget would formalize any changes to fiscal targets.
“The mission welcomes the steps the authorities are taking to strengthen governance and accountability. The authorities have prepared a draft fiscal responsibility and transparency law that will implement some of the Economic and Monetary Community of Central African States (CEMAC) directives on public financial management, and would improve budget accounting, preparation, and execution. The authorities are encouraged to take full advantage of the ongoing Public Expenditure Management and Financial Accountability Review (PEMFAR) assessment by the World Bank and other development partners. The PEMFAR should help to identify steps to improve budget execution and procurement and disbursement processes. The public expenditure review will be important in efforts to improve efficiency and quality of spending across the key sectors of the economy. Efforts to improve the selection, evaluation, and monitoring of investment projects as well as the budgeting of their operating and maintenance costs need to be strengthened. The mission recommended that a comprehensive audit of domestic arrears be completed as a matter of priority and that a repayment plan is included in budget planning.
“The authorities have launched important initiatives to boost inclusive non-oil growth and address deep-seated structural weaknesses that impede competitiveness. As part of their efforts to diversify the economy and create job opportunities, the authorities are also moving ahead with the development of four Special Economic Zones (SEZs) one of which has started operations. However, the mission cautioned the authorities to carefully analyze the implications of the fiscal incentives for SEZs that were introduced in the 2014 budget law. The mission urged the authorities to expedite their efforts to strengthen the business climate of the country as a whole in line with the International Finance Corporation (IFC)-supported action plan. Reforms are needed to develop the financial sector, so that it can fully contribute to the financing of Congo's development goals.
“The mission welcomes the authorities' support for the ongoing review of CEMAC's reserves pooling framework. The mission also welcomes the steps being taken by the authorities to strengthen the National Institute of Statistics with the aid of IMF technical assistance and training. This will be important towards the strengthening of the quality and timeliness of economic data.
“The mission confirmed that the IMF stands ready to continue to work with the Congolese authorities to address these challenges, including by providing technical assistance. The Executive Board of the IMF is expected to consider the staff report on the 2014 Article IV consultation in July 2014. The mission wishes to thank the authorities for their warm hospitality and constructive cooperation.”
1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.