IMF Executive Board Concludes 2022 Third Review Under the Extended Credit Facility Arrangement with The Democratic Republic of the Congo

  • The IMF Executive Board decision allows for an immediate disbursement of about US$203 million to the Democratic Republic of the Congo. This disbursement will help reinforce international reserves, given downside risks to the domestic and global economy outlook.
  • Despite multiple shocks, economic activity has proven resilient supported by higher-than-envisaged mining production. Growth is forecast at 6.6 per cent in 2022, but inflation is expected to exceed 12 percent by end-2022.
  • The Fund-supported program continues to support the authorities’ medium-term reform program to foster macroeconomic stability and sustainable development by stepping up domestic revenue mobilization, strengthening governance, and reinforcing monetary policy.

Washington, DC : The Executive Board of the International Monetary Fund (IMF) concluded the third review of the Extended Credit Facility (ECF) arrangement for the Democratic Republic of the Congo (DRC). The completion of the Third Review allowed an immediate disbursement equivalent to SDR152.3 million (about US$ 203 million) to support balance-of-payment needs, bringing the aggregate disbursement to date to SDR609.2 million (about US$812.4 million).

The DRC’s macroeconomic environment is showing resilience despite the spillovers of the war in Ukraine and the deteriorating global economic environment. Real GDP is showing resilience, with growth forecasted at 6.6 percent in 2022 supported by higher-than-projected mining production. Inflation is expected to exceed 12 percent by end-2022, due to higher global food and fuel prices exacerbated by the war in Ukraine and supply chain bottlenecks. The current account reached a surplus in the first half of the year driven by strong exports, and as of end-October, gross international reserves have reached about 2 months of imports, well-above the objective at the beginning of the ECF arrangement. The 2022 domestic fiscal balance (cash basis) is projected at 1.1 percent of GDP, in line with program commitments, despite unanticipated spending pressures raising from the escalating conflict in the East, increased outlays in ministries and public institutions, and arrears repayment to fuel distributors, funded by higher unexpected fiscal revenues mainly due to favorable mining developments.

Progress under the program remains satisfactory. All end-June 2022 quantitative performance criteria were met, and all indicative targets (ITs) except for two: the one related to health spending due to procurement delays; and the one related to the central bank’s guarantees for central government domestic loans due to monitoring shortcomings and despite the fact that no new guarantees were issued. Efforts to meet the social spending under the IT will require close monitoring during implementation. Four of six structural benchmarks were also met, and a fifth one was achieved with a small delay.

At the conclusion of the Executive Board’s discussion, Mr. Okamura, Deputy Managing Director and Chair stated:

“Macroeconomic performance in 2022 is strong, despite recurrent shocks. Growth is robust and external buffers have strengthened, notwithstanding rising global energy and food prices. Performance under the Extended Credit Facility (ECF) arrangement remains satisfactory. While growth prospects remain favorable in 2023, downside risks emanate from adverse terms-of-trade shocks and the conflict in the east.

“The fiscal deficit is expected to narrow in 2023. Sustained revenue mobilization and contained current spending in goods, services and subsidies are expected to provide space for social spending, infrastructure, and human capital investment, and arrears clearance. Saving revenue overperformance would support efforts to build buffers. Phasing out the fuel subsidy and establishing targeted social transfers are important measures to strengthen social safety nets to protect the vulnerable. Enhancing budget credibility should help the budget serve as a fiscal anchor under the program. Revamping the fiscal framework to manage resource wealth, strengthening the public investment framework, and accelerating public financial management reforms are necessary to enhance spending efficiency and transparency.

“Readiness to tighten the monetary stance to bring inflation to the 7- percent target together with efforts to strengthen the monetary policy framework will support price stability. Further accumulation of reserves, while enhancing the role of the exchange rate as a shock absorber, is essential to external resilience. The recent adoption of the new banking law is crucial to strengthen financial sector regulation and supervision.

“Sustained efforts to improve governance, including in mining, strengthen the anti-corruption and AML/CFT frameworks, and enhance the business environment would support private sector development and competitiveness. Committing to specific climate-related reforms is also important to catalyze financing for green investments.”

Public Release. More on this here.