Is the Congo Brazzaville on the path for debt relief ?

The answer to this simple question will be yes.  However, a press release of April 19 2018 by the IM makes it difficult to answer by a simple yes to this question. In according to that press release the republic of Congo and the IMF came to an “understanding”, whatever that really mean. One thing is sure that the IMF and the authorities of the republic of Congo have concluded their negotiations on April the 18th. These negotiations started on April the 3rd of 2018. The purpose of these negotiations was according to the IMF press release number 18/137, to discuss the Congolese authorities economic, and financial program and possible financial support by the IMF.

After 15 days of work, the parties to the negotiations came to the conclusion that the Congolese authorities still have a lot of work to do in order to secure support from the IMF. Basically, the Congolese authorities need to take “bold and immediate governance reforms to put into effect the government proclaimed intention to make a break with the past policies and practices.” Said the IMF press release.

The Congolese authorities on their part have pledged to  publish governance study that guide future reforms in the area of governance, transparency and public finance management, to establish an independent anti corruption body with full investigation powers and an asset declaration system for high level officials, to reinforce oversight over large investment projects and state owned enterprises such as oil companies, to report fully to the parliament and the population on the management of natural and large infrastructure investment projects, to enhance transparency in oil sector with view to increase the share of the state in the nation natural resources, to approach all companies exploiting natural resources with time bound requests to declare any claims they may have on the government share of resources .

This decisions are necessary in order for the country to secure a debt relief. This are the requirements that the IMF are making to the authorities have the Congo.  the country is in deep recession.  Judging from all that is been put out through the press release are officials statements,  the negotiations with the IMF are still focused on the economic based on resources and especially oil. Among the recommendations of the IMF, is the the need for the Congolese authorities to ” develop capacity to systematically reconcile all government transactions backed by natural resources.” The IMF meaning its staffs, also thinks that a strong participation of civil society will be critical for the success of the governance reforms. The IMF and the Congolese authorities economic talks mainly focused on auditing the oil sector in order for the country to regain confidence of the investors in order to secure a debt relief. If this mission that started about a year ago purpose is to audit the oil sector, it will be a failure on a long run. The Congo Brazzaville has always been under some type of program by the IMF. In the 90, the program was called structural adjustments program. And of course , because the Congo Brazzaville is one of those resources rich countries of Guinea Golf, any program that the IMF and its partners will implement will be guaranteed by natural resources. Frankly, it is kind of strange why it is taking so long  to put the country on such a program, especially when the work they have been doing is mostly oriented on natural resources. it seems like the authorities are still hoping for the oil price to pick up to a level it was 4 to 5 years ago.

When a country is in deep recession like the Congo Brazzaville is in right now, without being an economist, it is fair to say the solutions should come from a broader economic picture. It is important for the Congo Brazzaville authorities to realize that the solution to the country’s financial problems can be found beyond the equation called debt plus oil equal economy. This is a recipe for failure and it has always been. There is a say that bankruptcy is not always a bad thing. It strange how in the middle of talks with the IMF, a meeting of all finance ministers of the CFA zone countries is held in Brazzaville. And at the end of the meeting, a pledge is made my the French finance minister to help the Congo brazzaville with 135 millions Euro in aid which is actually another debt that will be guaranteed by the future oil production of the Congo. How can you pledge to land such amount to a country that is in default and unable to pay its debts?

The Congo will be better of focusing on non oil economy by developing a private sector and reorganizing its fiscal system. After the fall of crude oil prices, many countries, whether it is in Africa or Asia that relied on oil for their economy were in deep trouble. Most of them made a shift to non oil economy, and the results has been spectacular for some of them . This is the case for many Asian countries such as Saudi Arabia or Kuwait. Many economic experts have been noticing there is an economic rebound in this part of the world by the end of 2017. the predictions are the economy of countries such as Saudi Arabia will fully recover by the year 2018.  how did these countries recover quickly compare to those of Africa such as the Congo Brazzaville?  well , in the case of Saudi Arabia for example, the country entered into two years of austerity , and rolled out a plans that balance the need to rebuild state coffers while avoiding crippling private business said an article on Bloomberg markets of December 2017. A shift to non oil economy made a different. In fact, non oil economy is an engine to job creation. while assessing the situation of Timor Leste, the Asian bank of development prescribe the same path for this country to  attain a sustainable economic results.

The way forward for the Congo Brazzaville is to create a vigorous private sector  in order to grow the economy and improve the livelihood of its population.  for the private sector to be vigorous, the authorities need to improve the investments climate y enhancing dialogue among the population and the authorities,  to strengthen private sector contracts and create  a judicial system that is capable of settling commercial dispute in timely manner.  It is said that “a government is more likely to design credible and workable reforms when its ministries work together in coordinated way and when it engages with the private sector. In the Congo Brazzaville women are really active in the private sector.  However, the private sector is still informal.  Formalizing these activities that women participate in will  be beneficial for the government in order to collect revenue. The Congo also need to rethink its fiscal system. It is safe to say that in the case of the there is not really a need of reform when it come to tax issues. The problem is enforcement of the system. and this is what the negotiation mission program work on with the authorities of Brazzaville. and certainly there are working really hard to raise money that the state need in order to be operational. The Congo also need to rethink its educational system. It is clear from the way the public finances are  managed, there is an issue of promoting mathematics, accounting or public accounting.  In the Congolese educational system, by the time student enter high school, they get to pick their specialty too early. Students will choose to focus subject related to literature( philosophy, franc,  history…) or to science( mathematics, chemistry, physics, biology). Early on in their life students will neglect either or subjects. Those who have chosen literature will neglect all science subjects and vice versa. But in the real world you will need all these subject matters.

The Congo is indeed on a path to get on one of those IMF programs and get its debt relief, would it be a sustainable program certainly not if there is not a serious review of the fiscal system and a promotion of the private sector.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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