Macroeconomic performance of the Republic of Congo “has been broadly satisfactory thus far in 2014”, according to team of the International Monetary Fund (IMF) that Tuesday completed a nine-day visit to Brazzaville.
The team however warned that the government’s elevated spending implies a deviation from the fiscal rule that the authorities introduced in 2013.
”If fully implemented, the budget will considerably widen the non-oil primary deficit and hold back fiscal savings in 2014,” IMF Mission Chief Dalia Hakura said, noting that the elevated level of government spending was mainly due to preparations for the All Africa Games.
Meanwhile, Congo’s growth is projected at 6 percent in 2014, in light of a slight rebound in oil production.
The country’s year-on-year inflation has continued to decelerate and the overall price level in June 2014 was virtually unchanged from a year ago, largely as a result of declining food prices.
“Against the backdrop of the limited remaining lifetime of oil reserves, the recent decline in international oil prices makes it more urgent for the authorities to revert to a path of fiscal consolidation starting from 2015, while enhancing the efficiency of government spending,” Ms. Hakura said in a statement made available to PANA here Thursday.
”In this regard, targeting an early reduction of the non-oil primary deficit that also limits the growth of government spending by more than currently envisaged in the 2015 budget would help to safeguard fiscal and external buffers and contribute to mitigating risks to macroeconomic stability in the medium-term,” she suggested.
It was the IMF team’s view that in a context of rising global oil production, the Republic of Congo is facing an uncertain external environment.
“There are downside risks to oil prices from a weaker global economic outlook, including slower growth in China,” said the Mission Chief. “For the 2015 budget, the authorities should examine the scope for larger fiscal adjustment while safeguarding targeted social spending and growth-enhancing capital spending.”
The mission welcomed the authorities’ intention to prioritise completion of basic infrastructure projects while also taking steps to begin the conditional cash transfer programme.
According to the mission’s statement, Congolese authorities were also encouraged to follow up on recommendations from the ongoing Public Expenditure Management and Financial Accountability Review by the World Bank and other development partners.
“This should help to identify reform actions needed to strengthen budget execution, procurement and disbursement processes,” it said.
The statement went on: “The authorities should continue with ongoing structural reforms to support inclusive growth in the non–oil sector. The mission welcomes the authorities’ near term focus on ensuring access to water for all, and encourages continuing efforts to improve the business climate, which remains one of the most challenging in Sub–Saharan Africa. These reforms will be important to unlocking the potential of the private sector in the Republic of Congo.”
Besides, the mission noted the authorities’ continued commitment to a prudent debt management policy, and suggested that against the backdrop of recent increases in external debt, which now stands at about 30 percent of Gross Domestic Product, the continued reliance on concessional borrowing will help maintain long–term debt sustainability and preserve the hard won gains of the Highly Indebted Poor Countries/Multilateral Debt Relief Initiative granted in 2010.
Execution of Congo’s macroeconomic policy and structural reform agenda would also benefit from enhanced transparency, but the long delays in data availability hamper the timely assessment of the macroeconomic policy stance.
In this regard, the mission welcomed the authorities’ efforts to strengthen the National Institute of Statistics through the development of a national statistics action plan with IMF technical assistance.