IMF grants the DRC a $203.3 million loan to bolster foreign exchange reserves
The International Monetary Fund (IMF) has granted the Democratic Republic of the Congo a $203.3 million loan to increase the nation’s foreign exchange reserves, which have dropped to $4.5 billion and are now only enough to pay two months’ worth of imports.
The loan is a component of the extended credit facility (ECF) agreement the DRC agreed with the multilateral lender in July 2021. Under the terms of the agreement, DRC will receive 1.066 special drawing rights (SDRs), or about $1.52 billion, by the year 2024.
With the payment, the total cash received under the agreement now stands at $1.02 billion. The East African Community (EAC) trading bloc’s mandated 4.5 months of import cushion has not been met by the DRC’s foreign exchange reserves.
The IMF had previously predicted that a sustained increase in mining yields may help fend off the country’s economic headwinds and ensure an improved growth in GDP this year, but the expansion in DRC’s primary exports only partially offsets the rise in imports.
“The current account deficit deteriorated to 5.3 percent of GDP, as higher export growth only partially compensated for higher imports and a more deteriorated service account,” IMF said in a statement last week.
The ongoing decline in Kinshasa’s foreign exchange reserves is a result of the country’s significant trade imbalance, which is now at 5.3% of GDP and is exacerbated by other domestic and global economic shocks.
The ongoing conflict in the nation’s east and the upcoming elections in December, according to Kenji Okamura, the IMF’s deputy managing director, have increased uncertainty, decreased government revenue collection to below expectations, and increased public spending, limiting spending on priority areas.
The international lender reduced its prior forecast of 8.9% for this year’s GDP to 6.8% this year.
In response to revenue collection below target, the IMF wants Kinshasa to execute more reforms, including as expenditure restrictions and reprioritization.
Improved spending efficiency, tighter controls on spending under emergency procedures, and better cash management will improve budget execution and provide space for much-needed social and development spending.
Readiness to further tighten the monetary stance, strengthen the monetary policy framework, and enhance the independence and safeguards of the central bank will support price stability,” Mr. Okamura said.
“Reforms to strengthen the rule of law and the judiciary system, curb corruption, and improve transparency in the mining sector and public finances are critical to improving the business climate for private investment and economic diversification,” the deputy managing director added.
As part of the ECF agreement, the IMF had pushed Kinshasa to implement a number of changes to enhance the business environment and encourage private investment.
According to the lender, the DRC has so far implemented the most of the changes suggested, with the exception of those calling for a lower cap on social spending and a ceiling on central bank-guaranteed government loans.
