Financial Crime World

Congo’s Economy Shows Resilience Amid Fiscal Challenges

The International Monetary Fund (IMF) has recently praised the Democratic Republic of Congo’s economy for its resilience in the face of fiscal challenges.

Improved Fiscal Balance

According to the IMF’s latest report, the country’s base domestic fiscal balance improved by 0.1% in 2022, despite a decline in domestic arrears and a widening overall fiscal deficit. This improvement was attributed to an increase in net credit to the government and international reserves, which led to a 38% expansion of the monetary base in 2022.

Monetary Base Expansion

The report noted that excess reserves reached CDF1.2 trillion (16% of banks’ total domestic currency assets) at end-January 2023, compared to outstanding BCC bills of CDF170 billion.

Private Sector Credit and Bank Deposits

Private sector credit picked up, growing by 46% and standing at 8.6% of GDP at end-2022. However, bank deposits stagnated, with:

  • FX deposits growing by only 3% (compared to 31% in 2021)
  • Deposits from the extractive sector falling by almost 60%

Dollarization

The report highlighted the stability of dollarization, with:

  • FX deposits and lending accounting for 85% and 95%, respectively, of total deposits and lending
  • Net interest margins and profitability increasing, partly due to higher dollar interest rates

Local Development Program for Rural Territories (PDL-145T)

The government’s PDL-145T program is making progress, despite a slow start in 2022. The program aims to improve access to basic infrastructure and services in rural areas and allocated:

  • US$511 million to build schools, health centers, and administrative buildings in 2022
  • US$203 million for rural electrification in 2023

However, longer-than-expected bidding procedures have delayed contract signing. The implementation rate reached 33.7% at end-March 2023.

IMF Assessment

The IMF praised the government’s efforts to strengthen capacity and improve procurement and investment processes, despite delays. The country has also made progress in implementing its National Strategic Development Plan, which aims to improve access to basic infrastructure and services in rural areas.

Conclusion

Overall, the report concluded that Congo’s economy is showing resilience amid fiscal challenges, and the authorities are taking steps to address weaknesses in public investment management and improve transparency and accountability in public spending.