IMF Sees Opportunities in Congo After Peaceful Transition

(Bloomberg) -- The Democratic Republic of Congo must seize the opportunity to institute reforms to boost state revenue and economic growth, the International Monetary Fund said in its first annual review of the country’s economy since 2015.

President Felix Tshisekedi, in power since January, is seeking to repair Congo’s relationship with the Washington-based institution after it soured under his predecessor, Joseph Kabila. The former head of state, who was in charge for 17 years, didn’t permit the IMF to undertake an annual check on economic, financial and exchange-rate policies, known as Article IV Consultations, during his final years in office.

Congo’s “peaceful political transition provides an opportunity to put in place transformational reforms to strengthen public finances, boost growth of the non-extractive sector, tackle corruption, and reduce widespread poverty,” the IMF said Wednesday.

The central African nation’s revenue-to-GDP ratio of 12% “is well below the average for sub-Saharan Africa” and annual budgets passed by parliament “have tended to deviate widely” from the resources actually raised, according to the lender.

IMF Assessment

Then-IMF Managing Director Christine Lagarde sent a team to Congo to carry out an inspection after meeting Tshisekedi in April. It recommended authorities step up the fight against corruption and “pursue efforts to sharply increase international reserves,” which at the time covered only three weeks’ imports of goods and services. Tshisekedi hasn’t said if he intends to request financial assistance from the lender.

“It’s very encouraging that the government has re-engaged with the IMF,” said Charles Robertson, global chief economist for Renaissance Capital. “It’s also positive the IMF praises the balanced budget and sees only moderate risk of debt distress.”

Former opposition leader Tshisekedi has repeatedly pledged to tackle corruption and in May told a meeting in Washington that endemic graft had discouraged serious investors from coming to Congo.

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The president is running Congo in partnership with Kabila and the two men last week appointed a power–sharing government. While the ex-president’s handpicked candidate finished third in the presidential contest, his supporters dominate the National Assembly and Senate.

The government’s priority will be to grow budgetary receipts and “rationalize” expenditure, Prime Minister Ilunga Ilunkamba, a Kabila ally, told lawmakers on Tuesday.

Transparency and Accountability

The IMF halted a $532 million three-year loan program for Congo seven years ago after Kabila’s government failed to publish details of a 2011 mining deal. Local non-governmental organizations have called on the fund to insist on independent audits into the management of public companies, singling out state miner Gecamines.

The IMF called for the “public tendering of mining assets, publication of all mining contracts, disclosure of true ownership of contractual parties, and publication of audited financial statements of state enterprises.” The IMF will conduct a governance assessment mission next month at the invitation of the Congolese authorities, the report said.

A review of Gecamines’ management is “urgently needed,” according to a background document also published Wednesday by the IMF.

Mining sales from the world’s biggest cobalt producer and fourth-largest source of copper account for over 90% of total exports, according to the IMF. Congo is “highly vulnerable to external shocks.”

“Even Congo is not immune to Trump’s trade wars – the global manufacturing slump has hit copper and cobalt prices,” Renaissance Capital’s Robertson said.

To contact the reporter on this story: William Clowes in Kinshasa at wclowes@bloomberg.net

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Hilton Shone, Jacqueline Mackenzie

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