An International Monetary Fund (IMF) team led by Pritha Mitra, Head of Mission of the Republic of the Congo, undertook a virtual mission with Congolese authorities during 31 March-18 April 2022, to discuss the first review of a three-year arrangement for the Republic of Congo under the Credit Facility Agreement which Be extended.
At the end of the mission, Ms. Mitra issued the following statement:
“The IMF team reached a staff-level agreement with Republic of Congo authorities on completion of the first review under the Extended Credit Facility (ECF), subject to approval by the IMF Executive Board.
“The economic recovery is gaining momentum but remains fragile against the backdrop of the COVID-19 pandemic and the global consequences of the war in Ukraine. Real GDP growth is expected to strengthen to 4.3 percent in 2022, driven by increased oil production and momentum from agriculture and mining, as well as continued vaccine rollouts and domestic arrears payments with the latter contributing to a reduction in non-performing loans and financial sector stability. Stronger economic activity was restrained by rising inflation, projected at 3.5 percent, as global food and oil prices soared due to the Ukraine war. High oil prices, if maintained, will benefit the economy but great uncertainty looms over oil price projections.
“Debt is assessed to be sustainable after a substantial debt restructuring and prudent implementation of fiscal policy. However, debt vulnerability remains large, especially in the midst of high oil price volatility. Pending settlement of external arrears, the debt is classified as “in trouble”. Progress in the procurement and management of public debt and finance, including public investment, will be important to avoid the accumulation of domestic and external arrears and improve the efficiency and quality of spending. Coupled with the adoption of a new anti-corruption architecture, debt management reforms will also help strengthen recent gains in governance and transparency.
“Fiscal policy needs to strike a balance between supporting a strong economic recovery while maintaining debt sustainability. Revenue mobilization and rationalization of inefficient subsidies to state-owned enterprises will be key to this process—enabling gradual fiscal consolidation while increasing spending on social assistance, health care, education, and infrastructure. These spending priorities will support higher, more inclusive and resilient growth. To this end, ongoing tax administration reforms should be complemented by increased collection of tax arrears, the elimination of significant tax and customs exemptions, and concrete steps to increase oil-related fiscal revenues. The execution of the 2022 State Budget correctly targets a 15.3 percent deficit of non-oil and gas GDP.
“Against this backdrop, after financing debt services, a portion of unexpected oil revenues will have to finance tax deferrals initiated during the pandemic and increased social assistance to help, respectively, low- and middle-income businesses and households cope with high inflation. Accelerated measures to facilitate access to credit for small businesses will complement these measures. By 2022, any remaining oil revenue windfall should be used to build a buffer against future shocks. Correspondingly, if high oil prices are to be sustained over the medium term, a windfall equivalent to about 2 percent of non-oil GDP per year will have to be channeled into critical social spending, including infrastructure, and domestic arrears payments while saving the rest.
“The performance under this program has been good. All quantitative performance criteria for the end of February 2022 are met. Structural benchmarks for the end of March 2022 related to the new medium-term public finance management (PFM) strategy and action plan have been achieved. Other structural benchmarks were not met but the most important elements were implemented on time. In particular, the new anti-corruption law was passed in Parliament in February and ratified in March. An accompanying decision on conflict of interest rules and procedures is pending and is being developed with support from IMF technical assistance.
“Support from development partners will be critical to the successful implementation of the authorities’ economic and structural reform strategy.
“The mission met with the Minister of Finance, Budget and Public Portfolio, Mr Rigobert Roger Andely, and other senior government officials. The IMF mission also met with representatives of civil society, the private sector, and development partners.
“The IMF team thanks the authorities for their excellent collaboration and constructive discussions.”
Distributed by the APO Group on behalf of the International Monetary Fund (IMF).
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IMF Staff Reach Staff Level Agreement on First Review of Extended Credit Facility Arrangements with Republic of Congo
Source link IMF Staff Reach Staff Level Agreement on First Review of Extended Credit Facility Arrangements with Republic of Congo