June 20, 2024

IMF warns favorable 2023 economic outlook in DR Congo overshadowed by ‘armed conflict’ in the East and ‘uncertainty’ in an electoral year

Managing Director Kristalina Georgieva and Director of Communications Gerry Rice conduct the IMF Managing Director Press Briefing during the 2022 Annual Meetings at the International Monetary Fund. IMF Photo/Cory Hancock 13 October 2022 Washington, DC, United States Photo ref: CH221013011.arw

The International Monetary Fund on Wednesday revised the real GDP growth in the Democratic Republic of the Congo upwards to 8.5 percent in 2022 thanks to stronger production in the mining sector, and projected that it will remain elevated in 2023.

The Fund asserted that the favorable 2023 outlook is, however, “overshadowed by heightened downside risks from an escalation of the armed conflict in the East, uncertainty in an electoral year, the continued impact of the war in Ukraine, and adverse terms-of-trade shocks.”

“Advancing structural reforms remains crucial to sustain macroeconomic stability under a challenging environment and to support higher and more sustainable and inclusive growth,” the IMF wrote in a statement after its staff team led by Mercedes Vera Martin concluded a staff visit in Kinshasa during February 8-14, 2023, to discuss recent economic developments, the economic outlook, and progress on reforms supported by the ongoing Extended Credit Facility (ECF) arrangement.

“Preliminary data show significantly stronger real GDP growth in 2022 than previously anticipated. Growth is now estimated at 8.5 percent, as stronger-than-expected mining production (which grew at about 20 percent) more than compensated for a downward revision to non-extractive growth (to 3.2 percent from 3.9 percent),” Martin wrote.

Martin added, “Annual inflation reached 13.1 percent at end-2022 on account of higher food, energy, and transport prices. Preliminary data also suggest that the current account deficit widened in 2022, due to strong import growth and deteriorated terms of trade. Despite this deterioration, the Central Bank of Congo (BCC) has reported gross international reserves at US$4.6 billion, about $300 million above the previous projection. The 2022 overall fiscal balance is estimated to have deteriorated as spending increased to address the security situation and arrears repayments.

“Growth for 2023 is projected at 8 percent, but there are important downside risks from the armed conflict in the East, uncertainty ahead of the elections, the continued effect of the war in Ukraine, and adverse terms-of-trade shocks. In this context, sustaining prudent macroeconomic policies will help bolster resilience to external shocks. Additional revenues would help build fiscal buffers and improving export prices will facilitate building up reserves.

“Revenue mobilization efforts and containing current spending, by strengthening the expenditure chain and putting in place adequate safeguards, remain critical to build fiscal space to address the security situation. This will require additional social spending considering the deteriorated humanitarian conditions, with an increase in food insecurity and in the number of internally displaced people. More broadly, public financial management reforms, including establishing the single treasury account and strengthening the public procurement system and public investment management, will help improve the budget process and its credibility, enhance fiscal governance, and improve absorption capacity and spending efficiency. In addition, starting to implement the domestic arrears clearance strategy will enhance government credibility.

“The BCC is expected to remain proactively vigilant to deliver price stability while continuing to build reserves for external resilience. Reforms to strengthen the monetary policy framework and central bank governance will help improve liquidity management and monetary policy effectiveness. The new commercial banking law will help implement ambitious reforms to bolster banking sector resilience and promote financial inclusion.

“Improving the business climate and mobilizing investment, critical for economic diversification and private sector-led growth, relies on continued efforts towards strengthening the anti-corruption framework, rationalizing the tax system, continuing enhancing the transparency in the mining sector, and publishing beneficial ownership information for awarded government contracts. The new law on Anti-Money Laundering/Combating the Financing of Terrorism and the action plan with the Financial Action Task Force will help enhance financial integrity.

“The findings of this visit will inform the preparation of the fourth review mission under the ECF arrangement tentatively planned this April in Kinshasa. The IMF staff team thank the authorities and their technical teams for the candid and constructive discussions and look forward to continuing engagement in support of the Democratic Republic of the Congo.”

Elections in DRC and conflict in the East:

Human Rights Watch asserted on earlier this month that the Rwanda-backed M23 armed group has committed summary executions and forced recruitment of civilians in eastern Democratic Republic of Congo while the Congolese army is responding to the M23’s offensive by collaborating with ethnic militias with abusive records.

The warring parties have increasingly appealed to ethnic loyalties, putting civilians in remote areas of North Kivu province at a heightened risk.

“Rwanda-backed M23 rebels in North Kivu are leaving behind a growing trail of war crimes against civilians,” said Thomas Fessy, senior Congo researcher at Human Rights Watch. “Rwanda should end its military support for the M23 while Congolese government troops should prioritize protecting civilians and cease using abusive militias as proxy forces.”

“The Rwandan government’s support for the abusive M23 rebels is raising concerns about further ethnic violence in eastern Congo,” Fessy said. “Greater international pressure is urgently needed so that Rwanda and Congo take all steps necessary to end abuses and ensure the protection of ethnic groups under threat.”

Recent investigations by the United Nations Group of Experts on Congo, as well as Human Rights Watch research, provide significant photographic and other evidence that Rwanda is not only giving logistical support to the M23, but that Rwandan troops are reinforcing or fighting alongside the armed group inside Congo. The Rwandan government has denied supporting the M23 rebels.

The renewed hostilities by the M23, the Congolese army, and various other armed groups has forced more than 520,000 people to flee their homes, according to the United Nations. This has exacerbated an already catastrophic security and humanitarian situation in North Kivu and the broader eastern region. The humanitarian organization Médecins Sans Frontières has warned of a potential health disaster as cholera spreads rapidly in camps for displaced people outside Goma, the North Kivu provincial capital.

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