IMF, Congo set targets to deal with overspending

WASHINGTON – The International Monetary Fund and Democratic Republic of Congo have agreed on policies to address government overspending in late 2007 prompted by unplanned security costs, an IMF official said yesterday.

“The spending overruns contributed to an eight per cent depreciation of the Congolese franc and a 16 per cent annualised inflation rate at end-January 2008,” Brian Ames, the IMF’s mission chief to Congo, said in a statement after a visit to the capital Kinshasa. Congo government forces attacked rebel positions in the volatile east where conflict between government forces, warring rebels and militia has raged despite a formal end to the country’s 1998-2003 war.In October, Congo President Joseph Kabila gave a green light to the army to plan an offensive to forcibly disarm dissident groups after they missed deadlines to re-integrate into the national army.The IMF’s visit to Kinshasa from February 17 to 26 looked at implications for the government’s economic program of the price and exchange rate developments prompted by overspending, Ames said.The talks took place as the IMF also considers whether to grant the government a three-year loan agreement.Further talks between government officials, the IMF and World Bank are expected in Washington in April.Ames said the government had agreed to new economic targets for the end of March and June, including ways to strengthening public financial management.”Exchange rate and inflationary pressures instigated by the recent fiscal slippages appear to have abated in response to remedial measures undertaken by the authorities,” Ames said.Congo authorities tightened monetary policy in early January, which has curbed further pressures on the exchange rate and inflation.”Prudent monetary policy along with strict budgetary discipline should anchor macroeconomic stability in line with the expectations of the Congolese people,” Ames added.He said the IMF had also assessed the likely economic and financial impact of large mining and social infrastructure projects being finalised in Congo “although some further clarifications will be needed”.”Concerns remain, however, over the management of public finances and the composition of spending.In particular, the large wage bill risks crowding out priority spending for goods and services and domestically financed investment,” Ames said.Nampa-ReutersCongo government forces attacked rebel positions in the volatile east where conflict between government forces, warring rebels and militia has raged despite a formal end to the country’s 1998-2003 war.In October, Congo President Joseph Kabila gave a green light to the army to plan an offensive to forcibly disarm dissident groups after they missed deadlines to re-integrate into the national army.The IMF’s visit to Kinshasa from February 17 to 26 looked at implications for the government’s economic program of the price and exchange rate developments prompted by overspending, Ames said.The talks took place as the IMF also considers whether to grant the government a three-year loan agreement.Further talks between government officials, the IMF and World Bank are expected in Washington in April.Ames said the government had agreed to new economic targets for the end of March and June, including ways to strengthening public financial management.”Exchange rate and inflationary pressures instigated by the recent fiscal slippages appear to have abated in response to remedial measures undertaken by the authorities,” Ames said.Congo authorities tightened monetary policy in early January, which has curbed further pressures on the exchange rate and inflation.”Prudent monetary policy along with strict budgetary discipline should anchor macroeconomic stability in line with the expectations of the Congolese people,” Ames added.He said the IMF had also assessed the likely economic and financial impact of large mining and social infrastructure projects being finalised in Congo “although some further clarifications will be needed”.”Concerns remain, however, over the management of public finances and the composition of spending.In particular, the large wage bill risks crowding out priority spending for goods and services and domestically financed investment,” Ames said.Nampa-Reuters