REPUBLIC OF CONGO

The Republic of Congo is still affected by the oil price slump. The country is saddled with a heavy debt burden, the result of an effort to secure oil exports and allow a high level of public spending ahead of July 2017 legislative elections despite the impact of low oil prices on fiscal revenues.

Debt and deficits skyrocketed. Current account plunged to -43% of GDP and the fiscal balance tumbled to -18.6% in 2015. An IMF mission uncovered hidden public debt contributing to send the figure up from 38% of GDP in 2013 to 117% in 2017. As the current account deficit is still quite high, the country will need fresh financing. The local economy is exposed to financing shortages and runs the risk of a ‘sudden stop’ and a sharp recession.

The new government will have to find an overarching solution to the financing problem. The submerged part of the iceberg stems from various contracts the national oil company signed with China and companies such as Glencore, betting on an oil price recovery. This is likely to reduce Congo’s ability to negotiate the potential upcoming IMF structural adjustment plan, in addition to harming its reputation as an international borrower.

In an effort to curb its fiscal deficit, the government decided to give up on major infrastructure projects, drastically cutting public spending.

Yet as import covers declined to less than 3 months, the country needs to rebalance in order to reduce its financing needs. This may prove a difficult task in a country with rampant youth unemployment (18.7%).