Congo's Debt Burden Lightened

• Author: Robert York, Misa Takebe
• Position: IMF Africa Department

The decision will reduce Congo’s debt burden by 34 percent and was reached after the country met a series of rigorous conditions under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. Having reached the HIPC completion point, Congo has now qualified for debt relief under the Multilateral Debt Relief Initiative (MDRI).

"The conditions for reaching the completion point under the HIPC Initiative were set very high for Congo. The intention was to support the authorities’ efforts to prioritize public expenditures, firm up public financial management, combat corruption, and bolster governance and transparency in the management of its oil resources," said the IMF’s mission chief for Congo, Robert York.

"The HIPC completion point clearly demonstrates that the authorities are determined to lay a firm foundation for enhancing growth and reducing poverty, which is very encouraging," he added.

From war to recovery

The granting of debt relief marks a significant milestone in Congo’s path towards recovery following a devastating civil war. Despite its wealth in natural resources and fertile land, Congo has suffered years of stagnation, with the civil war blunting capacity and hampering economic management. In 2000, per capita income in real terms was only around 70 percent of what it had been 20 years earlier.

Following the end of the civil war and the establishment in 2002 of Congo as a republic, a new government was elected into office. Since then, successive governments have been rebuilding the institutional and administrative capacity needed to implement sound macroeconomic policies and structural reforms.

Relations with the Fund

Against this background, Congo has also been strengthening its ties with the IMF. In 2004, it signed on to a three-year Poverty Reduction and Growth Facility arrangement with the IMF, but weaknesses in capacity resulted in uneven program performance under this arrangement. In March 2006, the country qualified for HIPC and MDRI debt relief with very difficult conditions set by the Executive Boards of the IMF and the World Bank.

These were designed to demonstrate a commitment to poverty reduction and a good track-record of economic management, the strengthening of public financial and resource management, governance and transparency.

In a bid to establish a track record of solid economic...