economic growth weaker than expected in 2023 – Independent Congo

2023-05-04 17:01:04

The 13% depreciation of the exchange rate since the beginning of the year has contributed to the deterioration of social conditions. In addition to improving the business climate – promoting the diversification of the economy – the IMF recommends that the Congolese government increase budgetary revenues. The Fund also recommends the implementation of “prudent budgetary policies” for the rest of the year. This is to enable the country to meet the expenses generated in particular by the insecurity in the east of the country and the organization of the elections.

Gaston Mutamba Permission

According to the latest estimates from the International Monetary Fund (IMF), Congo/Kinshasa will experience a growth rate of 6.8% in 2023 against previous estimates of 8.0%. This remains high compared to the 3.6% growth rate forecast for Sub-Saharan African countries. The IMF forecasts are close to the growth rate of 6.7% retained in the finance law for the 2023 financial year. These figures were made public at the end of the fourth review of the three-year agreement under the Extended Credit Facility (ECF), which was held in Kinshasa from April 19 to May 3. At the end of the mission of the IMF experts, a press release was made public indicating that the IMF team reached an agreement with the government on the criteria of the program. This will allow a disbursement, at the end of June, of 152.3 million SDRs (about 200 million dollars) for support to the balance of payments after the agreement of the IMF’s Board of Directors. The statement noted that “…While the economy is showing resilience, macroeconomic imbalances have emerged. Real GDP growth is estimated at 8.9% in 2022, due to higher than expected mining production, and is expected to reach 6.8% in 2023, again thanks to the extractive sector. Higher-than-expected tax revenues in 2022, including windfall revenues from the extractive sector, have helped to increase current spending, mainly windfall expenditures related to security and repayment of arrears. The domestic fiscal deficit widened in 2022 to 1.3% of GDP and the acceleration in spending at the end of 2022 generated excess liquidity and contributed to inflationary and exchange rate pressures…” The The 13% depreciation of the exchange rate since the beginning of the year has contributed to the deterioration of social conditions. Due to the mechanical link that exists between the exchange rate and prices, the inflation rate was 17% during the same period. This comes in a context dominated by the shortage of maize flour following poor harvests in Zambia, the main supplier. The IMF recommends implementing prudent fiscal policies for the rest of the year. To enable the country to cope with the expenses caused by insecurity in the east of the country, the organization of elections and the war in Ukraine, the IMF recommends increasing budgetary revenue and diversifying the economy. According to the IMF, “improving the business climate remains essential for the diversification of the economy and for private sector-led growth and relies on continued efforts to implement the anti-corruption framework, streamline the tax system, improve transparency in the mining sector and publish information on the beneficial ownership of beneficiaries of public contracts. Major reforms are needed to operationalize the law on the fight against money laundering and the financing of terrorism adopted in December 2022, and to get off the gray list of the Financial Action Task Force (FATF). To fight inflation, the IMF recommends that the Central Bank of Congo tighten monetary policy to contain inflationary pressures, while continuing to build up reserves to withstand external shocks. We must not lose sight of the fact that raising the key interest rate risks slowing down economic activity. Rather, reforms must be undertaken to increase the supply of agricultural production, reindustrialize the country, facilitate business, encourage local and foreign direct investment, improve existing infrastructure (ports, airports, roads, rails, bridges, electricity and water ). Otherwise, the country will go from IMF program to IMF program without experiencing inclusive economic growth, namely that which translates into job creation.

Gaston Mutamba Permission