2023-11-04 15:01:51
For IMF experts, growth remains resilient despite a difficult and uncertain environment. The budgetary situation deteriorated and inflation accelerated. They encourage prudent economic policies and limiting non-essential spending. Decisive progress is needed to make the law on combating money laundering and the financing of terrorism (AML/CFT) effective. The aim is to implement the action plan to get off the Financial Action Task Force’s gray list.
Gaston Mutamba Permission
Experts from the IMF (International Monetary Fund) held discussions in Kinshasa with political and monetary authorities from October 18 to October 31. These meetings focused on the evaluation of reforms and policies carried out within the framework of the three-year agreement under the Extended Credit Facility (ECF). This was approved on July 15, 2021, by the IMF Executive Board. It concerns a total amount of 1.066 billion SDRs (Special Drawing Rights), or approximately 1.52 billion dollars. According to the IMF press release of October 31, “Based on a preliminary assessment of program performance and an agreement on the economic policies to be implemented, the authorities of the Democratic Republic of Congo and the IMF team reached an agreement at the level of services on economic policies with a view to concluding the fifth review of the ECF arrangement. Subject to IMF Management approval and review by the IMF Executive Board expected by mid-December 2023, completion of the review will enable the disbursement of SDR 152.3 million (around $200 million) to constitute international reserves…”
Economic results remain mixed
For IMF experts, growth remains resilient despite a difficult and uncertain environment. The budgetary situation deteriorated and inflation accelerated. Consequently, they encourage the implementation “prudent economic policies, including limiting non-essential spending, as well as efforts to improve public financial management, monetary policy implementation, governance and transparency. During the period under review, there was a resurgence of inflation. Prices accelerated to 23.3% year-on-year in July 2023, before returning slightly below 22% in October 2023”.
The increase in prices results from the accelerated depreciation of the exchange rate. It eased with the intervention of the Central Bank of Congo (BCC) in the foreign exchange markets with the sale of 150 million dollars. At the same time, the BCC raised its key rate to 25% in August. The IMF believes that the BCC must further strengthen its monetary policy in order to contain inflationary pressures. Furthermore, the flexibility of the exchange rate must serve to absorb external shocks and thus preserve foreign currency reserves. These amount to 5 billion dollars. But they still remain insufficient. To be comfortable, these reserves should reach 9 billion dollars corresponding to 6 months of imports of goods and services. Thus, interventions in the foreign exchange market must be limited to mitigating large depreciations in the exchange rate of the national currency.
Budget revenues were lower than forecasts, notably due to the drop in cobalt prices. According to the IMF, spending was accordingly adjusted to prioritize security and election-related spending, as well as other current spending, rather than repaying arrears. The GDP growth rate expected in 2023 will be above 6% despite the insecurity reigning in the east of the country and the fall in cobalt prices. Ultimately, IMF experts recommend that the authorities intensify their efforts “to improve transparency and governance, including through continued commitment to timely publication of mining contracts and strong control institutions, such as the Court of Auditors or the General Inspectorate of Finance. Decisive progress is needed to make the law on combating money laundering and the financing of terrorism effective (LCB/FT) and to implement the action plan to get off the Financial Action Task Force’s gray list”.
IMF policies also have limits
IMF policies intended to correct balance of payments imbalances and combat poverty have failed to create prosperity in most African countries. IMF assistance should in principle be limited in the short term. It is not uncommon to see countries resort to prolonged use of its resources. Some African countries have been in a program with the IMF for more than fifteen years and continuously without this resulting in inclusive growth of their economies. Rather, we are witnessing economic growth without development, non-inclusive economic growth which does not create jobs. Poverty continues to increase. On closer inspection, poverty is more a political fact than an economic one. It will be difficult to initiate economic development as long as there is foreign interference under the principle of stabilizing existing powers, even corrupt ones, as long as we turn a blind eye to the rigging of elections, as long as we find it normal that Leaders take pleasure in changing articles of the constitution to drag on in power unnecessarily and as long as the statistics are distorted.
The failure of credit facilities also calls into question the design and execution of these programs. The objectives of IMF programs aim not only to maintain a desirable balance between total supply and demand, but also to allow demand to grow in line with national resources. The austerity implied by these policies often results in increased social misery and in some cases, civil conflict. As for the liberalism which is the corollary of these programs, some point out that Asian countries began their development by applying policies contrary to those advocated by the IMF. We also saw Malaysia emerge from the Asian crisis of 1997 thanks to an economic program designed by the nationals, which was the opposite of that of the IMF. It often happens that experts from the Bretton Woods institutions stand out for their contempt and ignorance of local realities. The programs are thus imposed with unmistakable brutality. They therefore carry within themselves the seeds of their failure.
As the leaders, elites and population of countries do not feel consulted in the formulation of programs, they do not engage and do not mobilize in their favor. There is also the resentment implied by the loss of national sovereignty, faced with the ukases of IMF experts. Critics only see these policies as a means of imposing liberalism and forcing poor countries to become more open to foreign interests. There is an information gap here that must be resolved. This means that programs should be designed and thought through primarily by those who are most affected by them, the ultimate beneficiaries. Doing so will make their application in the field easy. It also happens that for purely political considerations, the IMF turns a blind eye to non-compliance with performance criteria. The failure of the programs thus stems from the fact that the authorities do not sufficiently apply the recommended reforms. By these actions, we are only postponing until tomorrow the reforms that should be undertaken today. However, the big question that must be asked is what would become of these countries without the help, assistance, financing and advice of the IMF.
Gaston Mutamba Permission
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