IMF disburses $203m for DR Congo to boost economy

The Executive Board of the International Monetary Fund (IMF) has concluded the Article IV consultation  and the second review of the Extended Credit Facility (ECF) Arrangement for the Democratic Republic of Congo (DRC).

The completion of the Second Review allowed an immediate disbursement equivalent to 152.3 million SDR (about US$203 million) to support balance-of-payment needs, bringing the aggregate disbursement to date to 456.9 million SDR (about US$653 million).

The DRC’s macroeconomic environment has improved since the last Article IV consultation in 2019.

The IMF said the authorities have adopted prudent macroeconomic policies, most visibly by halting central bank financing to the government.

Despite the COVID-19 pandemic, the Fund considerable macroeconomic gains were achieved in 2021 and reform momentum under the ECF arrangement was sustained.

The economy rebounded more than envisaged with growth at 6.2%, supported by non-extractive growth. Consumer Price Index (CPI) inflation declined to 5.3% year-on-year, accompanied by a stable exchange rate as the central bank stopped providing financing to the government.

The fiscal outturn was better than projected, as higher fiscal revenues and external financing provided space for additional spending, mostly on investment although domestic arrears accumulated.

The external position improved, and gross international reserves increased to US$3 billion at end 2021. However, despite excess liquidity, private sector credit remains subdued at 7% of the GDP and the banking sector faces vulnerabilities. Fragility continues to hinder inclusive growth as 72.5% of the population is in poverty and access to basic public services is severely under-provisioned.

The IMF added that progress under the Fund-supported programme remains satisfactory.

End-December 2021 quantitative performance criteria (QPCs) and all but one (on social spending due to shortcomings in inter-ministerial coordination) indicative targets were observed.

Four out of five structural benchmarks (SBs) were met, pending the publication of one mining contract. Progress on two end-June 2022 SBs is slightly delayed, and staff proposes resetting to end-September. Efforts to implement structural reforms are being stepped up.

In 2022, the Fund said DRC’s economy is facing some headwinds from the war in Ukraine, which has increased the cost of living and the fiscal costs associated with the fuel subsidy. Despite the deteriorating global economic prospects, the outlook remains favorable sustained by improved mineral prices.

Growth has been revised down to 6.1% (6.4% previously) and inflation revised up to 11 percent due to imported prices.

The domestic fiscal deficit (program target) is projected to widen by 0.4 percentage points of GDP, to 1.4 percent of GDP as the higher mining revenues will not fully compensate for the increased fiscal costs associated with the fuel subsidy and higher domestically financed investment for priority social infrastructure projects.