71607
AFTP 3
Africa Region
World Bank
TABLE OF CONTENTS
Foreword .............................................................................................................................. 1
Highlights .............................................................................................................................. 2
1. Political context ........................................................................................................................ 3
2. Macroeconomic performance in 2010 ..................................................................................... 3
3. Main Structural Reforms .......................................................................................................... 6
4. Economic Outlook for 2011...................................................................................................... 8
5. World Bank activities in DRC .................................................................................................... 8
Appendix 1. Selected Economic Indicators 2008-15.............................................................. 11
Appendix 2. Democratic Republic of Congo, Doing Business ReportS 2009-11 .................... 13
Appendix 3. Soaring global food prices: impact and response of the DRC ............................ 14
Contact Information
Headquarters
Jan Walliser, Sector Manager
Eric Bell, Lead Economist
Johannes Herdeschee, Senior Economist
DRC Country Office WBGN Phone: 5377+3058
4847, Avenue Wagenia
Commune de la Gombe
Kinshasa, Democratic Republic of Congo
Marie Françoise Marie-Nelly, Country Director
Moïse Tshimenga, Resident Economist,
Acknowledgements
This report is based on information available through March 2011. The principal author is Moïse Tshimenga
(Resident Economist). This report benefited from guidance provided by Eric Bell (Lead Economist) and
Johannes Herdeschee (Senior Economist). Peter Osei was responsible for coordinating the production of the
report. Lucie Bobola Lufiauluisu (Team Assistant) provided valuable support in the editing of this report. Word
processing assistance was provided by Paula White.
FOREWORD
T his report is part of a series aimed at monitoring economic
developments in the Democratic Republic of Congo . The main
objective of these reports is to provide regular updates on key
macroeconomic developments and reform initiatives. The reports focus
on macroeconomic developments and key structural reforms that have
both significant short and medium term impacts. This report presents a
broad overview of macroeconomic, political and structural developments
in the Democratic Republic of Congo (DRC) up to January 2011 and the
outlook for the remainder of 2011.
It is our hope that these reports will provide a valuable addition to other
economic reporting on the country. Comments on the content of this
report series are the most welcome.
Jan Walliser
Sector Manager
Poverty Reduction and Economic Management 3
Africa Region
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HIGHLIGHTS
DRC’s constitution adopted in 2006 has been revised in January 2011 by
Parliament. The main changes to the original texts include the election of
the president by a majority in a single round vote.
The presidential elections are scheduled for November 2011. In the
meantime, the revision of the electoral roll continues in the provinces.
The Congolese authorities have maintained prudent fiscal policies under the
IMF Extended Credit Facility (ECF) program, which has achieved the main
objectives of this program in 2010 with an inflation rate (end-of-period)
below the target of 9.9 percent. The economy has registered, thanks to the
dynamism of the mining sector, a solid growth rate of 7.2 percent compared
to 2.8 percent in 2009. GDP growth for 2011 is projected to reach 6.5
percent.
The external debt relief granted for DRC under the HIPC/ MDRI initiative in
July 2010 has significantly improved the status of its external debt.
The country's external position has improved. The current account balance,
including grants, improved from a deficit of 10.5 percent of GDP in 2009 to
6.8 percent in 2010. Favorable commodity prices on the world market
contributed to this development.
To ensure the sanctity of contracts and private property rights and enhance
the transparency of transactions in these industries, the authorities agreed
to pursue a broad range of reforms in the extractive industries, developed in
collaboration with the World Bank staff and other donors.
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DRC ECONOMIC REPORT
1. Political context
Electoral process. The Constitution of the practice and theme remains largely
Democratic Republic of Congo adopted in centralized at the central government level.
2006, has been revised in January 2011 by
2. Macroeconomic performance in
Parliament. The main changes to the 2010
original texts include the election of the
president by a simple majority of votes cast The macroeconomic situation has
in the first round1. The new Independent improved significantly in 2010. A year after
National Electoral Commission (CENI) has the sharp fall in world prices of
been installed, replacing the Independent commodities, as evidenced by the
Electoral Commission (Commission slowdown of growth to 2.8% in 2009, the
Électorale Indépendante, CEI). The Congolese economy has now responds to
challenge is now to organize presidential the dynamism of the recovery in global
elections scheduled for November 2011. In demand for commodities. The economy has
the meantime, the revision of the electoral registered a solid growth rate of 7.2%,
roll continues in the provinces. The delays supported by mining (mainly in the
of this operation, just some months before province of Katanga), construction and
the scheduled elections may affect the tertiary activities. Internally, the Congolese
timing of polling dates. authorities have maintained a prudent
fiscal policy under an IMF Extended Credit
Decentralization. Decentralization Facility (ECF) program, which has achieved
mandated by the 2006 Constitution the main objectives of the program with an
involves a series of reforms in different inflation rate below target and a growth
sectors. It provides the transfer of rate beyond the forecast in 2010.
responsibilities and resources to provinces Figure: Real GDP Grown and Contribution of key serctors
and decentralized territorial entities (ETDs). 9,0 Real GDP Growth and Contribution of Key Sectors
(Annual percentage change)
8,0
Others
Effective implantation of decentralization 7,0
6,0
requires also the adoption of some laws, 5,0
which are still under preparation (the 4,0
3,0
organic public finance law, provincial tax 2,0
1,0
nomenclature law …). Furthermore, the 0,0
2005 2006 2007 2008 2009 2010 2011 (Proj)
allocation of 40 percent of domestic -1,0
Source: Congolese authorities; and IMF staff estimates
revenue to be assigned to the provinces
and levied at the source is not respected in
1
The constitutional revision, which generally gives more power to
the presidency, include several changes in eight points, such as
placing the magistrates under the authority of the minister of
justice and giving the president the right to revoke provincial
governors and assemblies.
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Economic activity
Agricultural activities have remained sector which has contributed to over 20
largely on the rise due to the level of percent of the growth over the last three
production of industrial crops for export. years is mainly due to a revival in investor
Coffee production increased by 18.7 confidence since the start of reforms and
percent, mainly due to a good the resumption of cooperation with
performance of Arabica coffee. international financial institutions (World
Additionally, production of wood logs Bank, IMF, etc.).
increased by 81.7 percent due to the
Manufacturing industries in DRC are
recovery of international demand.
currently dominated by the brewery
Extractive industries grew by about 25 industry, which has grown by 8.5 percent
percent in 2010 due to the favorable world in 2010 due to additional demand within
market price for most mineral products. the country. The production of wheat flour
The copper price per ton has increased by fell by 3.7 percent in 2010, as a result of
30 percent in 2010. This performance was rising world prices of wheat, which
supported mainly by the production of affected the activities of the main milling
copper and cobalt, which increased by operator (MIDEMA). The cement industry
approximately 61 percent and 74 percent is still experiencing difficulties in meeting
respectively. increasing demand despite the efforts
Graph 2. Minerals production, 2005-10 made by CILU (Cimenterie de LukaLa, a
private company), which contributed to
growth of 18.9 percent in the cement
production. The decision to liberalize trade
in this sector failed to lower the price of
gray cement, which continues to sell at
more than 15 dollars U.S. (a sack), higher
than its normal price of 10 dollars U.S. In
Construction and public works. The order to revive the activities of this sector,
growth in the construction sector was national authorities have started
sustained with a rate of 8 percent on negotiations since last year with a French
average and has contributed to more than group Lafarge to sign an agreement in
10 percent of growth over the period order to sell the state’s shares at the
2005-10. In 2010, the sector grew by 8.4 National Cementery (CINAT).
percent, driven largely by infrastructure Table 1. Evolution of production by category of
good (tones, unless otherwise indicated)
projects in the framework of the Sino- 2008 2009 2010
Congolese agreement and other Coffee 15 051 9 070 9 879
Palm oil 7 176 3 937 685
development partners (such as the World Woods log (m3) 140 711 107 415 185 063
Bank Group). wheat flour 196 129 176 057 169 558
Alcoholic drink (1000 hl) 3 321 3 575 3 893
Soft drink (1000 hl) 1 554 1 795 1 932
Trade and Commerce. The wholesale and
Cements 411 212 443 550 527 331
retail trade registered an increase of 5.5 Source: Authorities (BCC)
percent in 2010. The dynamism of this
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Prices Graph 3. Central government financial operations
in percentage of GDP, 2005-10
After having peaked 53.4 percent at end- 35,0 Revenue (excluding grants)
December 2009, inflation declined 30,0 Expenditure
Overall fiscal balance
continuously to 9.8 percent in 2010, 25,0
20,0
against a target of 15 percent, following a 15,0
prudent fiscal management. In this 10,0
5,0
context, the national currency remained
0,0
stable with a slight depreciation of 1.4 -5,0 2005 2006 2007 2008 2009 2010
percent against the USD, compared to 29.2 -10,0
-15,0
percent in 2009.
Graph 2. Monthly Inflation (in percent), 2010 Current expenditures have been contained
at 14.5 percent of GDP in 2010, down by
3.7 percentage points compared to 2009,
due to lower interest on foreign debt and
lower transfers to provinces and collection
agencies. Wage policy has remained
broadly unchanged at 6 percent of GDP
between 2009 and 2010 despite the
increase in military pay and security
services salaries in April 2010 and some
Public finances increases in bonuses and allowances made
by the national authorities. However,
The overall fiscal balance (cash basis)
capital spending nearly doubled in 2010
returned to a surplus of 1.2 percent of
due to external aid as part of the
GDP, after several years of negative
infrastructure component of the Chinese
balance and a deficit of 5.2 percent of GDP
project of approximately 700 million
in 2009. This change is due in part to the
dollars US and projects of other
release in December 2010 of budgetary
development partners including the World
support from the EU and revenue windfalls
Bank. In terms of budget execution,
in the mining and telecommunications
significant overruns have occurred in favor
industries. Domestic revenues increased
of political institutions (including the
from 16.8 percent of GDP in 2009 to 18.9
Presidency).
percent in 2010 due to improved mining
and oil revenues. The fiscal surplus was The budgetary tightening has had a major
achieved despite the delay in impact on the allocation of funds to the
disbursement of budgetary support, a social sectors as shown in Table 2 below. In
shortfall of about 0.5 percent of GDP, due the absence of protection for these
to donor concerns about governance and sectors, the future implementation of
transparency in extractive industries. The social sector strategies will be in jeopardy.
national authorities have implemented Execution of the health budget only
fiscal policy on a cash basis in order to reached 23 percent.
preserve macroeconomic stability.
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Table 2. Execution of the budget in percent of system by an amount representing 2.1
total expenditures
Items 2008 2009 2010
percent of GDP. In 2010, nearly 66.6
percent of the money supply is composed
Political institutions 113% 86% 172%
including Presidence 266% 154% 244% of foreign currency deposits. The interest
Primature 166% 154% 185%
Ministries 82% 50% 20% rate applied to the money market has
including Health
Education
100%
95%
63%
75%
23%
61%
been successively lowered from 70 percent
Agriculture and rural dev 99% 74% 30% early in the year to 22 percent from August
Others 68% 110% 57%
Total 78% 70% 47% 2010. In addition, the government has
begun the process of recapitalizing the
Public debt
Central Bank in two steps to strengthen its
The external debt relief granted to DRC independence and effectiveness. After
under the HIPC completion point, several attempts to address the financial
additional bilateral assistance beyond situation of a large commercial bank
HIPC, and the MDRI in July 2010 has (Congolese Bank) in difficulty, the Central
significantly improved the status of its Bank finally decided to liquidate the bank.
external debt. The NPV of external debt
External sector
decreased from 193.3 percent of exports
at end December 2009 to 57.5 percent at The country's external position has
end 2010. With these reductions, the improved from a current account deficit
public debt service for 2010 fell to 4.7 (including grants) of 10.5 percent of GDP in
percent of GDP after being at 12.8 percent 2009 to a deficit of 6.8 percent of GDP in
in 2009. 2010. This improvement was primarily
based on increases in commodity prices in
Domestic debt has been estimated by
the world market, and the doubling of
national authorities to be the equivalent of
mining exports. As for imports, they also
1.2 billion dollars US at the end of 2009, or grew and reached 60 percent of GDP,
11 percent of GDP. This debt relates reflecting imports of capital goods. The
mainly from suppliers, public enterprises trade balance showed a surplus of USD 600
and public sector employees dating back to million, or 5 percent of GDP in 2010. After
the period of conflict in 1990s. a disbursement of about USD 70 million
from the IMF under the ECF program, as
Currency
well as emergency support from the World
The money supply grew by 35.0 percent Bank and other external partners, gross
year over year in 2010 compared to 50.4 official reserves rose to USD 1.3 billion by
percent in 2009. This slowdown correlates the end of December 2010, the equivalent
with the strengthening of fiscal policy. The of 8.1 weeks of imports, against 6.9 weeks
strong growth in net foreign assets that at end 2009.
has contributed significantly to increasing
3. Main Structural Reforms
the money supply in 2010, as did an
increase of 18.7 percent in private sector Public Finance Reforms. The
credit. By contract the state has government adopted in March 2010 a
accumulated deposits into the banking strategic plan that defines the major areas
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of public finance reform in the DRC, taking sector. They should be finalized by June
into account the failures identified by 2012.
different diagnostic studies (PEFA, PER, ...)
carried out in 2007-08. Under this plan, the Organization for the Harmonization of
Government expects to introduce the Business Law (OHADA). All legal
value added tax (VAT) from January 1st, requirements to implement the OHADA
2012 and modernize the Customs Act and framework have been adopted in February
public finance. Organic laws concerning 2010. The deposit of the required
the VAT and Customs Code have been instruments is still pending.
proposed to Parliament for ratification
Business climate. Through a series of
after their approval by the President. The
measures adopted by the Government in
draft laws on public finances are still under
early 2010, the DRC has improved its
consideration in Parliament. There have
ranking in certain areas of the “Doing
been significant delay in PFM reform
Business 2011�? ranking, currently
overall.
occupying the 175th position out of 183
Economic governance. To improve countries. These measures include the
governance and transparency in the reduction of days to obtain building
forestry, mining and petroleum industries, permits and a simplification of the process
the authorities have taken a series of for starting a business. The property
measures in consultation with the World transfer tax has been halved to 3 percent
Bank to restore investor confidence. One of property value. Congolese legislation
of these measures is to make public the also reduced some of the current
future concession contracts, mining, cumbersome roadblocks involved in the
forestry and oil and also grant all rights construction of buildings. The building
and concessions only by competitive permit cost has decreased to 0.6 percent
bidding. The government also committed of construction cost instead of 1 percent
to strengthen the legal certainty of previously.
financial and commercial transactions for Rank 2010 2011 Progress
international investment by joining the Ease of Doing Business 179 175 4
Starting a Business 155 146 9
New York Convention of 1958 on the
Dealing with 139 81 58
recognition and enforcement of Construction Permits
Registering Property 125 118 7
international arbitral awards. Getting Credit 167 168 -1
Protecting Investors 153 154 -1
Extractive Industries Transparency Paying Taxes 158 163 -5
Trading Across Borders 165 172 -7
Initiative (EITI). As part of its accession to Enforcing Contracts 173 172 -1
the EITI, a first report produced in 2007 Closing a Business 152 155 -3
Source: World Bank doing business Reports 2010-11
which covered only two products (copper
and cobalt) was considered insufficient to Procurement. Originally scheduled to
enable the DRC to be declared fully take effect in December 2009, the new law
compliant with the EITI. The reports for on public procurement was adopted in
2008 and 2009 in preparation cover all April 2010 and its implementation was
companies and all payments of the mining expected in October 2010. However, it is
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not yet fully operational: for example, the the accumulation of deposits of the State
installation of relevant institutions at Central Bank and the expected revenues
central and provincial levels to be taken by from the privatization of CINAT (National
the provincial assemblies are still lacking. Cement) should help to finance a budget
The Board of Directors of the Regulatory deficit of 1.8 percent of GDP. Moreover,
Authority (Autorité de régulation des the overall fiscal deficit of about 7.6
marchés publics, ARMP) has been percent of GDP should be covered by a
appointed but there the private sector has loan of approximately USD 750 million
yet to be involved in accordance with the under the infrastructure component of the
texts approved and published. agreement between China and the DRC.
4. Economic Outlook for 2011 Domestic revenue is projected to increase
to 21 percent of GDP due to improvements
In 2011, economic growth is projected at
from the tax and customs reform and the
6.5 percent, driven by the increased
impact of a full year of the recent
activity in the mining, construction and
adjustment in fuel prices. The improved
service industries. Despite a slight
performance of the mining sector should
slowdown expected in copper production,
contribute more to generate additional
the dynamics induced by the favorable
revenue (mainly fees) for 0.1 percent of
international environment for the mining
GDP. The pressures on costs identified
sector should continue in 2011.
concern: (i) a higher wage bill, largely to
However, the rise in global food and cover teacher salaries that had been
previously borne by the private sector and
energy prices since late 2010 threatens to
the payment of retirement indemnities to
accelerate inflation. The inflation target for
outgoing Members of Parliament in line
2011 was set at 13 percent against 9.9
with the government obligations, (ii)
percent originally to take account of the
higher health and education spending
food prices on international markets and (approximately in line with commitments
the adjustment of domestic fuel prices under the HIPC initiative), and (iii)
under a structural benchmark of the ECF spending linked to the presidential and
program. parliamentary elections planned for
November 2011.
On the fiscal side, government should
focus on increased mobilization of 5. World Bank activities in DRC
domestic revenue to meet expenditure
The allocation of IDA 15 funds for the DRC
pressures without resorting to bank
over the period FY2009 to FY2011 is
financing of the government deficit. Under
estimated at about SDR 720 million, or
the ECF program, projected expenditures
USD 1,078 million equivalent. New
are aligned with domestic revenue and
commitments for fiscal year 2010 (FY10)
expected foreign financing in order to
totaled USD 510 million against USD 536
avoid central bank financing of the budget.
Budget support from the European million in 2009 (FY09) and USD 222 million
in 2008 (FY08).
Commission and Belgium, a reduction in
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In January 2011, the Bank's portfolio in the emergency projects that helped to initiate
DRC with commitments amounting to the rehabilitation of infrastructure and
approximately 2,877.5 million dollars US services and develop capacity for
was disbursed of 42 percent. This portfolio implementation.
includes 19 projects including 6 emergency
and 13 sector projects, and covers four A new Country Assistance Strategy (CAS) is
main sectors, namely: infrastructure (60 being prepared and should take into
percent), social sector (23 percent), PSD, account the new Bank strategy for Africa
and agriculture (11 percent) and and PRSP II. The new CAS (FY13-FY15) will
governance (6 percent). comprise three main pillars: (i) economic
growth, (ii) poverty reduction, and (iii)
It should be noted that the Draft Program peace and governance.
for Emergency Multisectoral Rehabilitation
and Reconstruction (PMURR) performed
over the period 2003-2009 has closed
since March 2010 with a total outlay
estimated at USD 663,460,000. This project
served as a model for the series of
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ANNEXES
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APPENDIX 1. SELECTED ECONOMIC INDICATORS 2008-15
Table 1. Democratic Republic of the Congo: Selected Economic and Financial Indicators, 2009–15
2009 2010 2011 2012 2013 2014 2015
Prog. 1 Est. Prog 1 Proj. Projections
(Annual percentage change; unless otherwise indicated)
GDP and prices
Real GDP 2.8 5.4 7.2 6.8 6.5 6.0 8.0 6.1 5.9
GDP deflator 35.1 27.1 22.4 9.5 15.0 10.0 7.4 9.1 9.0
Consumer prices, period average 46.2 26.2 23.5 9.9 12.0 11.0 9.0 8.8 8.3
Consumer prices, end-of-period 53.4 15.0 9.8 9.9 13.0 9.0 9.0 8.5 8.0
External sector
Exports, f.o.b. (U.S. dollars) -33.6 48.3 91.1 11.3 30.9 4.5 18.4 -3.3 -0.5
Imports, f.o.b. (U.S. dollars) -26.3 46.4 58.2 10.8 15.2 1.3 16.4 -3.0 3.8
Export volume -6.2 8.0 52.9 6.3 7.7 3.9 21.4 2.2 2.3
Import volume -12.5 38.1 36.3 9.3 1.6 2.0 18.4 -1.8 4.4
Terms of trade -19.0 2.6 14.1 1.4 7.2 1.2 -0.8 -4.1 -2.1
Nominal effective exchange rate 2 -26.7 …
Real effective exchange rate 2 1.0 …
(Annual change in percent of beginning-of-period broad money; unless otherwise indicated)
Money and credit
Broad money 50.4 41.1 30.7 17.5 22.5 … … … …
Net foreign assets 17.0 57.8 63.2 10.6 9.5 … … … …
Net domestic assets 33.3 -16.4 -32.2 7.3 13.3 … … … …
Domestic credit 13.5 -2.1 -29.3 5.3 14.3 … … … …
Of which:
Net credit to government 3 -7.6 -12.2 -37.8 -1.8 2.4 … … … …
Credit to the private sector (annual percent change) 39.3 36.8 19.0 18.0 29.4 … … … …
(Percent of GDP; unless otherwise indicated)
Central government finance
Total government revenue 16.8 19.6 18.9 22.0 20.6 20.3 21.1 22.0 22.6
Grants 7.5 10.5 14.1 8.8 8.7 8.6 7.1 5.7 5.4
Total government expenditure 28.5 34.0 30.6 38.1 36.4 34.9 33.2 31.5 30.0
Domestic fiscal balance (cash basis) -2.5 -1.0 0.9 -1.3 -1.7 -1.4 -0.6 -0.4 -0.4
Overall fiscal balance (payment order basis, incl. grants) -4.2 -3.8 2.4 -7.3 -7.1 -6.0 -5.0 -3.7 -2.1
Overall fiscal balance (cash basis, incl. grants) -5.2 -5.3 1.2 -7.8 -7.5 -6.5 -5.0 -3.7 -2.1
Investment and saving
Gross national saving 8.9 10.4 20.2 18.9 26.8 34.3 35.1 34.7 31.0
Central Government 0.9 1.8 7.8 1.2 7.4 7.3 8.4 9.5 9.8
Nongovernment 8.0 8.7 12.3 17.7 19.4 26.9 26.7 25.2 21.2
Investment 19.4 30.4 27.0 35.9 29.6 35.0 34.5 33.5 32.3
Government 7.8 14.7 12.0 17.3 13.1 12.2 10.7 8.9 7.0
Nongovernment 11.6 15.7 15.1 18.6 16.5 22.7 23.8 24.6 25.3
Balance of payments
Exports of goods and services 45.2 56.1 68.4 58.0 77.8 75.9 82.8 73.9 67.7
Imports of goods and services 60.9 75.1 76.9 74.5 77.0 72.9 78.2 70.0 66.9
Current account balance, incl. transfers -10.5 -20.0 -6.8 -17.0 -2.8 -0.7 0.6 1.2 -1.3
Current account balance, excl. transfers -21.6 -27.0 -13.5 -22.4 -7.9 -5.5 -4.1 -3.5 -5.8
Gross official reserves (end-of-period, millions of U.S. dollars) 999 1,257 1,304 1511 1,510 2,068 2,218 2,468 2,718
Gross official reserves (weeks of nonaid-related imports of goods
and services) 6.7 7.5 7.9 9.3 8.6 9.4 10.3 10.8 11.0
External public debt
Total stock, including IMF 13,705 2,931 4,015 5,283 4,939 6,079 6,758 7,705 8,240
Present value (PV) of debt 4 9,750 3,773 2,489 3,997 2,907 2,918 3,363 3,689 3,996
PV of debt (percent of exports of goods and services) 194.2 58.9 27.7 57.4 24.7 23.8 23.1 26.2 28.6
Scheduled debt service 1,071.0 203.4 177.0 84.6 87.5 107.6 126.5 120.2 169.6
Percent of exports of goods and services 21.3 2.9 2.0 1.0 0.7 0.9 0.9 0.9 1.2
Percent of government revenue 39.6 5.5 6.4 1.9 2.6 3.0 3.1 2.6 3.4
Exchange rate, (CGF per U.S. dollar)
Period average 817 … 906
End-of-period 903 … 915
Memorandum item:
Nominal GDP (CGF billions) 9,073 12,163 11,908 13,863 14,585 17,005 19,734 22,831 26,353
Sources: Congolese authorities; and IMF staff estimates and projections.
1
EBS/11/15 (26/01/2011).
2
Change in annual average. Minus sign indicates depreciation.
3
The 2010 NCG takes into account the full proceeds of IMF HIPC debt relief while the program column does not.
4
Projections are based on calculations under the 2010 HIPC Debt Sustainability Analysis (EBS/10/121, 06/16/2010). Includes assistance beyond
the terms of the enhanced HIPC Initiative granted by some Paris Club creditors. Exports are on a three-year backward moving average.
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Table 3b. Democratic Republic of the Congo: Central Government Financial Operations, 2009–13
2009 2010 2011 2012 2013
1 1 Proj.
Prel. Prog. Est Prog. Proj.
(Percent of GDP; unless otherwise indicated)
Total revenue and grants 24.3 30.0 33.0 29.3 29.3 28.9 28.2
Total revenue 16.8 19.5 18.9 20.9 20.6 20.3 21.1
Customs and excise 6.2 7.0 6.3 7.1 6.5 6.7 6.9
Direct and indirect taxes 6.2 6.8 6.5 7.2 7.2 7.8 8.5
Petroleum (royalties and taxes) 1.5 2.4 2.2 2.6 2.8 2.6 2.3
Nontax revenues 3.0 3.3 3.8 4.0 4.1 3.2 3.3
Of which: Signing bonus from joint venture with China 1.1 1.0 0.0 0.8 0.8 0.0 0.0
Total grants 7.5 10.4 14.1 8.4 8.7 8.6 7.1
Budget grants 1.7 0.8 0.9 0.0 0.3 0.0 0.0
Project grants 2.0 7.4 6.0 6.0 6.0 6.3 4.6
HIPC Initiative assistance 2 3.8 2.2 7.1 2.3 2.3 2.3 2.6
Of which: IMF … 0.0 3.5 0.0 0.0 0.0 0.0
Total expenditure 28.5 33.8 30.6 36.2 36.4 34.9 33.2
Current expenditure 18.2 15.3 14.5 17.1 17.3 16.6 16.8
Wages 6.0 6.4 5.9 6.7 6.7 6.6 6.5
Interest due 5.5 2.4 2.2 2.6 2.6 2.4 2.3
Transfers and subsidies 3.1 3.1 2.5 3.1 3.1 2.7 2.7
Goods and services 3.6 3.4 3.9 4.7 4.9 4.9 5.3
Capital expenditure 7.8 15.0 14.1 16.5 16.6 16.7 15.6
Foreign-financed 5.1 11.8 11.5 12.5 12.5 11.3 9.6
Domestic-financed 2.7 3.2 2.6 4.0 4.1 5.4 6.0
Government 1.6 0.7 0.5 0.5 0.6 0.8 1.1
Provinces 1.1 2.4 2.1 3.5 3.5 4.6 4.9
3
Exceptional expenditure 2.5 3.2 2.1 2.2 2.2 0.9 0.4
Foreign-financed 1.1 1.8 0.4 1.2 1.2 0.8 0.4
Domestic-financed 1.5 1.5 1.7 1.0 1.0 0.1 0.0
Budget reserve 0.0 0.2 0.0 0.4 0.3 0.6 0.4
Overall fiscal balance (payment order basis) -4.2 -3.8 2.4 -7.0 -7.1 -6.0 -5.0
Domestic fiscal balance4 -1.5 0.5 2.1 -0.8 -1.2 -0.8 -0.6
Change in arrears (increase = +) -0.1 -0.8 -0.3 -0.4 -0.4 -0.6 0.0
Central bank operational result -0.9 -0.6 -0.9 0.0 0.0 0.0 0.0
Overall fiscal balance (cash basis, before interest rescheduling) -5.2 -5.2 1.2 -7.4 -7.5 -6.5 -5.0
Domestic fiscal balance -2.5 -1.0 0.9 -1.2 -1.7 -1.4 -0.6
Total financing 5.2 5.2 -1.2 7.4 7.5 6.5 5.0
Domestic financing -0.1 -1.5 -4.8 0.3 0.8 0.0 0.0
Banking system5 -0.8 -1.5 -4.8 -0.3 0.3 0.0 0.0
Privatization Receipts 0.7 0.0 0.0 0.5 0.5 … …
Foreign financing (net) 5.0 5.2 3.6 6.7 6.7 4.8 3.7
Amortization due before debt relief -7.3 -2.7 -2.5 -1.3 -1.3 -1.4 -1.9
Project loans 4.4 6.5 6.1 7.9 7.9 6.2 5.4
Debt relief 0.0 1.4 0.0 0.1 0.1 0.1 0.2
Residual financing need/errors and omissions 0.3 1.6 0.0 0.4 0.0 1.7 1.3
Memorandum items:
GDP (billions of CGF) 9,073 11,908 11,908 14,585 14,585 17,005 19,734
Domestically financed spending 18.3 19.5 18.0 21.3 21.5 21.7 21.7
Expenditure on education, health and rural sector development 5.3 … 5.9 6.5 6.5 6.5 6.5
Sources: Congolese authorities and IMF staff estimates and projections.
1
EBS/11//15 (26/01/2011); the ratios are calculated on the basis of revised GDP figures.
2
Reflects revised calculation of HIPC Initiative assistance on the basis of 2010 Debt Sustainability Analysis (EBS/10/121; 06/16/2010).
3
Exceptional expenditure includes spending for the Demobilization, Disarmament, and Reintegration program, and cost of the elections.
4
The domestic fiscal balance (commitment basis) is defined as revenue (excluding the signing bonus from the SCCA) minus total expenditure
(excluding interest on foreign debt, foreign-financed capital and exceptional expenditure).
5
For 2011 onwards, all Banking system financing is central bank only.
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APPENDIX 2. DEMOCRATIC REPUBLIC OF CONGO, DOING BUSINESS REPORTS 2009-11
Dem. Rep. of Congo, Doing business 2009 2010* 2011 SSA
Starting a Business (days) 155 127 84 45.2
Cost of registering property (% of property value) 9.2 9.8 7.0 9.6
Days to enforce contracts 645 625 625 639
Investor protection index 3.3 3.3 3.3 4.4
Payment taxes (Hours) 308 308 336 315.1
Payment taxes (number) 32 32 32 37.5
Times for exports (days) 46 44 44 32.3
Times for imports (days) 66 63 63 38.2
DRC Rank 181 179 175 …
Total countries 181 183 183 …
Source : World bank Doing business Reports 2008-11
*Doing Business 2010 rankings have been recalculated to reflect changes to the
methodology.
Some measures adopted for improving the DRC’s ranking in World Bank’s 2011 Doing Business
Streamlining of documents required for business registration,
Decentralization of the notary function,
Law authorizing the ratification of the OHADA treaty;
Cancellation of the legal visa for the status of associates,
Publication of business acts on the website of the Official Journal,
Reduction and publication of the cost of registration in trade, including the reduction to five-day period of
registration in the register of commerce;
Reduction and publication of business registration fees,
Reduction to 48 hours in the time required to obtain a business identification number,
Posting of the procedure for granting the authorization number of building and related costs;
Reduction in the cost of a building permit from 1% of the estimated construction cost to 0.6%
Reduction by half of the property transfer tax to 3% of the property value
Publication of the property transfer procedure and related costs;
The publication of calendar fiscal and quasi-fiscal controls.
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APPENDIX 3. SOARING GLOBAL FOOD PRICES: IMPACT AND RESPONSE OF THE DRC
Soaring global food prices:
Impact and Response of the Democratic Republic of Congo
Moïse Tshimenga Tshibangu
April 2011
Just when the world economy seemed to recover from its financial crisis of 2008-2009, prices of
food commodities are experiencing, once more, a massive increase during the second half of
2010. This is explained most notably by supply side shocks for some foods, thus rendering them
unable to match increasing demand. This paper discusses the effects of this increase on the
Democratic Republic of Congo (DRC)’s economy and the measures taken by the national
authorities to help in solving this problem.
1. Global prices of most of food commodities have risen remarkably during the second half
of 2010. According to the FAO, these prices increased by 42.2% between July 2010 and
February 2011 and 4.3 percent on average each month since July 2010; driven largely by
increases in the price of grains (67.9 percent), fats and oils (65.9 percent) and sugar (85.9
percent). Despite the initiatives taken by countries to deal with this crisis, the outlook indicates
that food prices will remain at very high levels in 2011, due to supply. In many developing
countries, in addition to domestic inflationary pressures, rising prices also create
macroeconomic vulnerabilities.
2. Domestic prices in the DRC have been disproportionately affected by higher global food
prices. According to the Central Bank of Congo (BCC), the increase in domestic prices in
Kinshasa has been contained to less than 10 percent at the end of 2010. The National Institute
of Statistics (INS) reported an increase of 17.2 percent against 34.8 percent in 20091. Despite
this relatively stable environment compared to 2009, apart from some products such as rice,
prices of key food commodities (maize, wheat, etc) significantly increased since July 2010 on
various Congolese markets. During the last eight months (from July 2010 to February 2011),
food prices have increased very rapidly by 16.1 percent, with significant increases for grains
(33.7 percent). It should be noted that this increase occurred after a downward trend in prices
of most other food products.
12,0 World food prices increased in the second half of 2010 ... with the largest increase for cereals.
... 25,0
10,0
20,0 Price domestic (change %) Price world (change %)
8,0 Price domestic (change %) Price world (change %)
6,0 15,0
4,0 10,0
2,0 5,0
0,0 0,0
-2,0
-5,0
-4,0
-10,0
-6,0
juil.-10
sept.-10
mars-10
mai-10
juin-10
févr.-10
avr.-10
févr.-11
août-10
déc.-10
oct.-10
nov.-10
janv.-10
janv.-11
mai-10
mars-10
janv.-10
janv.-11
juil.-10
sept.-10
févr.-10
juin-10
févr.-11
avr.-10
août-10
oct.-10
déc.-10
nov.-10
Sources: INS (official consumer Price index by Product group), FAO (food price indices) et FAO (consumer prices in selected cities of
DRC).
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3. The similar trend of domestic and global food prices highlights the extent of vulnerability
of the Congolese economy to external shocks. In the DRC, the food deficit is estimated at
about 30 percent of total household consumption which is covered by products such as maize,
rice, wheat, sugar, poultry, fish, meat and other foodstuffs. This level of deficit is sufficient for
domestic prices in the DRC to also be affected by the world price trends, in addition to the
monetary factors that have always prevailed over domestic prices2. The elasticity of domestic
prices relative to import prices is 0.46. This high elasticity justifies the important role of food
costs in total household expenditure. On average, Congolese households spend 65 percent of
their disposable income on food. This share is even higher for rural households.
4. Domestic food prices have evolved differently depending on the specific province and
products, but were highest in Kinshasa and Katanga3. Price increases were observed in
provinces with strong economic development. This is the case of Kinshasa and Katanga where
food prices are generally higher than elsewhere. Food commodity prices were affected
differently by province. However, the price of maize has accelerated sharply almost
everywhere. The prices of both maize and cassava; two of the most consumed food products by
the Congolese, rose more rapidly in Kinshasa and Bandundu between July 2010 and February
2011. Despite this surge, the price of maize has remained relatively stable in 2010 in Katanga
supported by a political decision by the provincial authority asking all mining operators to grow
this product. With regards to cassava as well as most other commodities, food prices remained
very high in Kinshasa and Katanga and relatively stable in Bandundu and Maniema.
5. The impact of higher prices on 70,0
purchasing power would exacerbate the 60,0 Variation of average food prices in selected cities
poverty of Congolese households. In DRC, 50,0
40,0
about 70 percent of the population lives on 30,0
Second half of 2010 First half of 2010
less than a dollar a day. Any increase in prices 20,0
10,0
of food commodities is likely to exacerbate 0,0
poverty because households would spend
Imported rice
Chicken
Maize (in seed)
Public means conveyance
Maize (in flour)
Local rice
Manured fish
Salted fish
Bean
Cassava (cossette)
Plantain
Chikwangue (in cassava)
Fresh fish
Beef
Fuel
Goat
Wheat flour
Palm oil
Casava (inflour)
-10,0
even larger share of their income on food. -20,0
-30,0
Cassava is a prime example of a staple food
item that alone provides 70 percent of the
calories of total daily consumption.
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Evolution of Wheat flour price Evolution of Maize flour price
1 500 (in local currency) 1 200 (in local currency)
1 000 Katanga
1 300
800
600
1 100
400
900 200
6-janv.-10 6-avr.-10 6-juil.-10 6-oct.-10 6-janv.-11 6-janv.-10 6-avr.-10 6-juil.-10 6-oct.-10 6-janv.-11
Katanga Bandundu Kinshasa Katanga Bandundu
Evolution of cassava flour price (in local currency) Evolution of Palm oil price (in local currency)
900 1 500
1 300
750
1 100
600
900
450
700
300 500
6-janv.-10 6-avr.-10 6-juil.-10 6-oct.-10 6-janv.-11
150
6-janv.-10 6-avr.-10 6-juil.-10 6-oct.-10 6-janv.-11
Kinshasa Katanga Maniema Kinshasa Katanga Bandundu
Sources: FAO (consumer prices in selected cities of DRC).
6. It is difficult to establish a direct link between the current development of local
production and rising food prices in different markets in the provinces of the DRC. Agricultural
production has not been sensitive to global prices. Agricultural production is largely subsistence
production. Food consumption represents 30 percent of total household consumption, the
highest of which is observed in the Bandundu province at 59 percent4 extent that the
agricultural sector in DRC is characterized by a number of constraints which make the supply of
food commodities more rigid, it is not clear that the global supply contraction could lead in the
short term to a domestic supply response (read: increase in production). Identified constraints
in the agricultural sector mainly concern: (i) the scarcity of quality agricultural inputs, including
certified plant material (seeds, cuttings, ...) which limit the productivity of food crops, (ii) the
low level of industrialization, which limits its production to the artisanal level, (iii) the
deterioration of the infrastructure that makes it difficult to transfer food to the commercial
centers, forcing local farmers to produce at small scale to meet the needs of the population
surrounding them and to focus on non-perishable products.
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Table 1. Agriculture production in selected provinces
Kinshasa Katanga Maniema Bandundu
2009 2010 2009 2010 2009 2010 2009 2010
(Contribution to Economic Growth in %, unless otherwise indicated)
Agriculture, livestock and fishing 56,2 24,6 35,2 4 83,9 99,7 17,1 186,5
Agriculture 29,1 12,2 28,1 3,5 85,7 99,1 -23,3 422,2
Fishing 12 13,2 10,2 0,3 0,1 0,1 4,4 69,8
Livestock 2,9 2,1 -2,4 0,4 -1,3 0,7 30,9 -184,7
Province GDP 100 100 100 100 100 100 100 100
Pour mémoire
Real GDP grow th rate (en %) 4,7 8 3,5 25 13,8 8,6 1,0 0,6
Agriculture (in percent of province GDP) 18 16,4 21,8 16,9 63,7 63,2 81,3 82
Real agricultural production (annual changes in percent) 17,2 12 5,7 5,9 18,2 13,6 0,2 1,3
Courant GDP (in millions of dollars US) 3 850,70 4 502,40 3 942,90 5 892,30 342,2 361,1 1 558,50 1 730,40
PIB courant par tête (in dollar Us) 557,6 622,8 396,3 573,3 194,1 198,2 218,8 235,6
Population (in millions) 6,91 7,23 9,95 10,28 1,76 1,82 7,12 7,34
Source: DRC (preliminary data provinces MTEF, 2006-2010)
7. Regardless of whether the global food crisis and increase in overall food prices directly
correlates with DRC’s unique agricultural economic structure, there is still a need to
understand the production variations in the different provinces. Production is often linked to
the context that makes some non-agricultural sectors more profitable than others. As an
illustration, the revival of mining in Katanga after the recovery of the global economy has
encouraged a return of economic activities in the province which was hit by the global financial
crisis of 2008-2009. Agricultural activities are less than 20 percent of the total production of the
provinces of Katanga and Kinshasa and contribute relatively little to provincial GDP. By contrast,
the contribution to the growth of output in other provinces remained important in such as
(Bandundu and Maniema), which have low access to imported food commodities. The following
table shows the share of the agriculture sector in the total production in the provinces of
Kinshasa, Katanga, Maniema and Bandundu.
8. To respond to these higher food prices, challenges need to be addressed by the
Congolese authorities. . The close relationship between global prices and domestic food prices
suggest the need for coordinated policies to remove bottlenecks hampering the development
of the agricultural sector, which can not only provide the population with food security, but also
protect the country from external shocks. To this end, the national authorities have identified
some shortcomings in internal, economic and administrative structures. Short-term measures
that have been taken are designed primarily to encourage the supply of goods with high
consumption by households. These include measures to eliminate administrative and police
hassles, both internally (collection of illegal taxes) and at the borders to facilitate the
movement of goods (see Box 1), as well as making agricultural equipment available and
increasing the quality of products produced.
9. This crisis offers the opportunity for more sustainable actions. This may be the
opportunity to clarify the country's trade policy by creating a working regulatory environment,
a reliable and fair tax system and institutional change promoting unrestricted trade both
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externally and internally. It is also an opportunity for the national authorities to reinforce
measures taken to facilitate traffic of goods and people across borders. In addition, measures in
the medium and long term strategies boosting agricultural production start by improving the
seed sector, the implementation of an incentive policy for private investment in the sector and
improvement of basic infrastructure (road, railway, electricity, etc.) to facilitate the delivery to
major centers of consumption of food.
10. The effective implementation of the agricultural strategy is the most sustainable
solution. In this context, the government should take action to implement the Strategy for
Agriculture and Rural Development "adopted in April 2010 and which recommends the
development of the area around the following five strategic lines (i) Market access
improvement, rural infrastructure and trade capacity, (ii) Improvement of crop production,
livestock, fisheries and handicrafts, (iii) Sector financing, (iv) Governance and institutional
capacity building and human resources, and (v) Organization of rural structures in self-
management. The recent signing of the compact for the implementation of PDDAA aims to
mobilize more resources for agriculture to achieve the goal of a minimum agricultural growth of
6 percent per year in order to improve food security and reduce poverty in half by 2015.5�?�
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A propos de l’auteur:
Moïse Tshimenga Tshibangu is Economist/AFTP3 at World Bank DRC country Office.
« The opinions expressed in this note reflect only those of the author, not necessarily those of the
World Bank or its officers».
Notes
1
Four services produce consumer price index (CPI) in the DRC (National Institute of Statistics, Central Bank of
Congo, the Institute of Economic and Social Research of the Kinshasa’s University of and economic cell of the
Embassy of the USA). The difference between the statistics produced by these structures lies both in terms of
methodology, price collection and made the number of items whose prices are subject to monitoring.
2
Banque centrale du Congo (BCC), Bulletin de l’Indice des prix à la consommation, Février 2010, page 8.
3
Four provinces of Country were selected according to three main characteristics, namely: access to imported
food commodities (Kinshasa and Katanga), the importance of agricultural activities (Bandundu) and isolation in
relation to geographical borders of the country (Maniema).
4
RDC, Institut National de la Statistique, Enquête 1-2-3, Phase 1, 2004-2005.
5
PDDAA: Programme Détaillé pour le Développement de l’Agriculture Africaine (dans le cadre du NEPAD).
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