The Democratic Republic of the Congo (DRC) is a country with vast resources. Its surface area (2.3 million km2) spans the equivalent of two-thirds of the European Union. Just under 40% of the nearly 70 million inhabitants live in urban areas, according to the latest NSI (National Statistics Institute) estimates. The country abounds in agricultural and mineral resources. The DRC has the potential to be one of the richest countries on the African continent and a driver for African growth.
Since 2001, the country has been recovering from a series of conflicts that broke out in the 1990s. In the late 1970s, the DRC sank into an economic and social morass, the effects of which are still being felt today. In 1999, following the signing of the Lusaka Peace accords, a transitional government had been established, pending the holding of presidential elections in 2006, which were held peacefully. New institutions, such as the parliament, the senate and provincial assemblies, are now operational. The second presidential elections, held in November 2011, gave rise to concerns about the credibility and transparency of the electoral process. The level of insecurity that prevailed in Kinshasa during the elections declined as soon as a new government was appointed. However, the resurgence of conflicts in the eastern part of the country is an important challenge.
Yet the DRC is still a fragile post-conflict country with huge reconstruction needs, but very little tax headroom and weak institutions. The country’s infrastructure, already hobbled by a lack of maintenance, has also been left badly damaged by the conflicts.
Despite progress made through political and economic reforms over the past five years, many communities live hand to mouth, with little access to markets to buy or sell goods and little access to public services. The United Nations estimates that there are some 2.3 million displaced persons and refugees in the country and 323,000 DRC nationals living in refugee camps outside the country. A humanitarian emergency persists in the more unstable parts of the DRC and sexual violence rates are high. Per capita gross national income (US$220 in 2012 according to the Atlas method) and human development indicators (the DRC ranks 186 out of 187 countries on the HDI) remains among the lowest in Africa.
Governance still gives cause for concern in the DRC. Faced with poor governance indicators, the government adopted a governance contract in 2007 that lays out its objectives in four crosscutting areas (decentralization, public finance management, public administration, and transparency) and three sectors (public enterprises, the mining sector, and the security sector, including the demobilization and reintegration of ex-combatants).
The Government also put in place a palette of measures in 2010 to improve governance and transparency in the extractive industries (forestry, mining, and oil sectors) and to improve the business climate. These measures are designed to consolidate the reforms launched under the HIPC Initiative, and restore confidence among private investors and development partners. As a result, almost all contracts in the oil sector and 134 out of 135 contracts in the mining sector have been issued. However, additional efforts must be made to entrench the principle of competitive awarding of mining, oil, and forestry contracts. In 2013, the government undertook a systematic process to improve economic governance in close collaboration with the World Bank. A governance matrix is now in place and progress is measured on a bimonthly basis.
The return to peace in most of the country in 2003 facilitated the adoption of political and economic reforms. From 2003 to 2005, the transitional government implemented prudent macroeconomic policies, brought hyperinflation under control, and laid the foundations for strong growth. The slippage of the macroeconomic framework in the pre-electoral period in late 2005, which prevented the sixth and last review of the program supported by the Poverty Reduction and Growth Facility (PRGF), was promptly corrected in 2006 with the help of an IMF staff-monitored program (SMP). The IMF’s Executive Board approved a new three-year program financed by the Extended Credit Facility (ECF) for the Government Economic Program (PEG 2) on December 11, 2009. The first three reviews of the IMF-backed program were satisfactorily completed in March 2010, February 2011, and April 2011, respectively. Following a 2009 slowdown to 2.8% prompted by the global financial crisis, the macroeconomic situation improved considerably starting in 2010. Real GDP growth remained solid above 7% between 2010 and 2012, driven mainly by the extractive industries’ performance boosted by favorable trends in commodity prices and by public investments, despite difficult international conditions. Inflation fell from 53.4% in 2009 to less than 10% in 2010 and was at 2.7% in 2012, and the trend appears to be holding steady for 2013 owing to a restrictive monetary policy in place.
Implementation of prudent fiscal and monetary policies alleviated the pressure on demand for foreign currency and kept the national currency relatively stable. In addition, gross international reserves were maintained at around $1.3 billion at the end of 2010 and 2011 and were about $1.6 billion in late 2012 and early 2013, accounting for approximately nine weeks of import cover, as a result of financial flows and capital inflows, especially those associated with HIPC relief and MDRI relief and with IMF disbursements under the ECF. However, because of the delay in implementing measures relating to governance and transparency in the extractive industries, the last three ECF reviews were not completed in time, so the Facility expired in December 2012.
The DRC’s medium-term economic outlook still seems positive even though its political and security situation remains fragile. In the medium term, the economy is expected to grow steadily at around 7 to 8% in 2012-13, following increased investment and growth in the extractive industries and the contribution of the civil engineering and service sectors; however, the risk of slipping back into debt remains high.
Last updated: September 2013