Dalia Hakura, Adrian Alter, Matteo Ghilardi, Rodolfo Maino, Cameron McLoughlin, and Maximilien Queyranne
INTERNATIONAL MONETARY FUND
The Republic of Congo has seen dramatic improvement in its debt situation since 2010, following debt relief through the IMF and World Bank Heavily Indebted Poor Countries/Multilateral Debt Relief Initiative. Large oil revenues have allowed the country to boost spending and increase foreign exchange reserves. Yet poverty and inequality remain comparatively high. This paper examines Congo's challenge to manage its natural resource revenue and attain sustained inclusive growth.
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1The national poverty line was about US$1.6 (CFAF 839) a day in 2005 (IMF 2012).
2This section uses “resource fund” as a synonym for SWF.
3The variables are in percent deviation from a trend-growth path, unless specified otherwise in parentheses.
4The predicted level of debt is slightly higher compared with the projected value of the staff report baseline value. This is caused by the presence of domestic and concessional debt in the simulations.
5Average production in 2012 and 2013 was 93 million barrels a year. After peaking at 118 million barrels in 2017, oil production is estimated to decline to about 18 million barrels by 2030.
6This analysis considers countries that have a per capita GDP (in purchasing-power-parity U.S. dollars) between 25 percent above and 25 percent below that of Congo. The analysis is based on internationally comparable data, for which the latest observation is 2011 or 2012.
7Congo’s population grew at an annual average rate of 3 percent over the same period.
8The latest available international Gini coefficient is for 2005. For comparative analysis, the 2011 figure was estimated by applying the percentage point improvement between 2005 and 2011 taken from the national household survey, for which the Gini coefficient went down from 0.42 to 0.39 over this period.
9Tax brackets are as follows (2014 budget act): 1 percent (CFA 0–0.46 million), 10 percent (CFA 0.46–1 million), 25 percent (CFA 1–3 million), 40 percent (CFA 3 to 8 million), and 45 percent (more than CFA 8 million).
17The “bankable” population refers to the share of the adult population with access to a formal financial account. The “better-off” and the “poor” are the top quintile and bottom quintile, respectively, of the adult population ranked by income.
18For a discussion about the link between finance and growth see Levine 2005.
19Piketty (2003) shows that the composition of the top 1 percent of the population by income is dominated by income flows related to rents, interest, and dividends.
20The group of SSA frontier and emerging market economies refers to the following countries: Ghana, Kenya, Mauritius, Nigeria, Senegal, South Africa, Tanzania, Uganda, and Zambia. This group was constrained by data availability.
21The benchmark represents the median value of a set of countries with similar GDP-per-capita characteristics.
22Short-term credit is concentrated in extractive industries’ activities, public sector work (Bureau of Public Works and Civil Engineering), and electricity. Long-term credit is negligible. At the end of 2013, credit to the private sector totaled CFAF 763.9 billion and represented 73.3 percent of total gross credit compared with 83.6 percent in 2012.
23The lack of collateral is one handicap of great economic importance for Congo. Land titles are not available, and property rights are not firmly established.
24Mutuelles Congolaises d’Épargne et de Crédit (MUCODEC).
25For a more detailed discussion of the policy recommendations for financial development in Africa see Allen and others 2012b.