Congo government proposes 23.2% budget cut for 2021

The Democratic Republic of Congo's government has proposed to parliament a budget of 14.2 trillion Congolese francs for 2021, a 23.2% decrease compared with the previous year, a draft document seen by Reuters showed on Wednesday.

The world's leading cobalt producer sees its economy growing 3.2% next year, the budget ministry document showed, after a projected contraction of 1.7% in 2020 caused by the economic shock of the coronavirus pandemic.

The slimmed-down budget, which still needs to be agreed by parliament, is one of several pre-conditions set by the International Monetary Fund, which is considering the lender's first formal loan program with Congo in eight years.

Congo has a record of proposing overly ambitious budgets that more closely track political calculations than fiscal realities, one analyst said.

The IMF's three-year Extended Credit Facility also includes demands for the publication of mining contracts, some of which were posted online last weekend; increased revenue collection, and new central bank management. Appointments to the bank are politically fraught and remain outstanding.

The IMF program, which could start in the first half of next year, may unlock financing from other bilateral donors including the World Bank.

Despite an emergency IMF $363 million disbursement in May, Congo's foreign reserves have fallen to critical levels as the coronavirus pandemic dampened domestic revenues just as the government increased spending to mitigate the virus' impact.

Mining royalties, which constitute 40% of non-tax revenue, are expected to slump 44% to 614 billion Congolese francs ($313 million) in 2021, driven by the suspension of mining because of insecurity, low mineral grades, a fall in cobalt prices and inflation of input costs, the budget ministry said.

The IMF suspended its previous loan program in 2012 after the government failed to provide sufficient details on the sale of state mining assets to an offshore company. ($1 = 1,959.65 Congolese francs) 

Reuters