The Democratic Republic of the Congo (DRC) is a country brimming with potential. Its surface area spans the equivalent of two-thirds of the European Union (2.3 million km2 - the surface area of Portugal, Spain, Italy, France, Switzerland, Belgium, Luxembourg, the Netherlands, Germany, Denmark, Austria, and Poland). The DRC’s population is widely scattered across the country. 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 extraordinary 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 and the effects of a protracted economic and social morass in which it has been mired since the late 1970s. In 1999, following the signing of the Lusaka Peace accords, a transitional government had been established, pending presidential elections in 2006 that were held peacefully. New institutions, such as Parliament, the Senate, and provincial assemblies, are now operational. The second presidential elections, held in November 2011, raised concerns about the credibility and transparency of the electoral process in the DRC. 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 that must be addressed with a view to restoring stability in that part of the country.
Yet, the DRC is still a fragile post-conflict country with huge needs in terms of reconstruction and economic growth, but very little tax headroom and weak institutions. The situation remains tense, especially in the eastern provinces, and precarious socioeconomic conditions persist in the country. Peacebuilding and recovery efforts are being carried out in a socially devastated country, where the 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, per capita income and human development indicators remain among the lowest in Africa. Many communities live hand to mouth, with little access to markets to buy or sell goods, as well as 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 many of the more unstable parts of the DRC, with high rates of sexual violence being one of the conflict-related impacts on the population.
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 regularly measured on a bimonthly basis. Faced with poor governance indicators, the Government had already 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. Significant progress in the implementation of these measures has been made over the past two years. Under this initiative, 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.
The return to peace in most of the country in 2003 paved the way for 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. The authorities successfully executed their economic program between 2010 and 2011 and met all of this program’s performance criteria and quantitative indicative targets. Following a 2009 slowdown to 2.8 % prompted by the global financial crisis, GDP growth improved significantly starting in 2010 and has since remained solid above 7%. This performance is driven mainly by the extractive industries’ strong performance, which was boosted by favorable trends in commodity prices. Public investments have also helped spur growth. Inflation fell from 53.4% in 2009 to less than 10% in 2010 and remained at a maximum of 1% in 2013. The sharp slowdown in inflation is due to a restrictive monetary policy characterized by the absence of bank financing of the budget.
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 US$1.3 billion at the end of 2010 and 2011 and were about US$1.7 billion in 2012 and 2013, accounting for roughly 8 weeks of import cover. This increase and the subsequent stabilization of the level of reserves are attributable to financial flows and capital inflows, especially those associated with the HIPC and MDRI initiatives 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%, following increased investment and growth in the extractive industries and the contribution of the civil engineering and service sectors. Maintaining a restrictive monetary policy and fiscal discipline is critical for keeping the target inflation rate under 5%. World Bank estimates confirm that the authorities’ support strategy for investments in large-scale infrastructure could significantly help boost growth if priority is accorded to high-return projects (e.g., transport and electricity). GDP growth could be accelerated further if these investments are coupled with reforms for improving the business climate, in particular by strengthening governance and transparency in the natural resources sector (e.g., forests, mines, and oil).
The HIPC initiative and the MDRI have considerably improved the debt situation in the DRC. In June and July 2010, respectively, the Executive Boards of the IMF and the World Bank approved US$12.3 billion in external debt relief to the DRC under the Heavily Indebted Poor Countries (HIPC) initiative and the Multilateral Debt Relief Initiative (MDRI). The joint IMF/World Bank debt sustainability analysis for the DRC underscores the crucial need to limit external borrowing to high concessional sources, strengthen debt management, and create more fiscal space by increasing revenues.
The Bank re-engaged in the DRC in 2001 after nearly a decade of suspended Bank activities due to widespread corruption and growing insecurity.
The new country assistance strategy for the period 2013-2016 aims to (i) increase the efficiency of the State at the central and decentralized levels and improve good governance; (ii) enhance the competitiveness of the economy by accelerating growth spearheaded by private sector job creation; (iii) upgrade the delivery of social services in order to improve human development indicators (HDI); and (iv) respond to problems of fragility and conflict in the eastern provinces of the DRC. In conjunction with the new operations, the strategy will be primarily based on the existing portfolio and should enhance its impact on development.
In May 2014, the World Bank’s portfolio in the DRC consisted of 25 projects in progress, representing a total commitment of $3.1 billion, including two regional projects for a total of $3.5 billion, including two regional projects representing $1.14 billion. The portfolio consists mainly of infrastructure rehabilitation projects (roads, railways, drinking water, electricity); governance in public finance management in four provinces and in the mining sector; reform of public enterprises and improvement of the business climate; rehabilitation of health and education infrastructures and improvement of health, education and social protection services; management of national forests and parks; and agriculture.
World Bank assistance has made a significant contribution to important changes through the following projects:
Health: Vaccination coverage for children under the age of one rose from 54% in 2007 to 83% in 2011 under the Health Sector Rehabilitation Support Project (HSRSP);
Education: Some 918 classrooms were constructed and 14 million textbooks distributed under the Emergency Urban and Social Rehabilitation (PURUS) and the Education Sector Rehabilitation (PARSE) projects. Primary enrolment rates climbed from 64% in 2007 to 93% in 2011, and 43,335 teachers were officially incorporated into the civil service.
Infrastructure: The rehabilitation of basic infrastructure helped revive economic growth by reopening 1,530 kilometers of national roads in Orientale, South Kivu, and Katanga provinces.
Energy:World Bank support helped strengthen the national electricity company [Société nationale d’électricité SNEL] through the establishment of a new executive board, recruitment of technical experts and managers, and the conclusion of a performance contract with the Government. As a result, the company’s revenues have increased 30% per kWh.
Public sector governance and capacity building: the governance matrix adopted in 2010 is the main framework for dialogue with the authorities on the subject of governance. Significant progress has been made in recent months with regard to the issuance of mining and oil contracts. Almost 80% of contracts and 100% of oil contracts are now issued.
Competitiveness and employment: The Competitiveness and Private Sector Development Project helped, among other things, reduce business start-up times by 51%
The Bank has been working on rallying donors to re-engage in the DRC since it resumed operations in 2001. Since then, foreign economic assistance has been on the rise with annual disbursements of US$800 million on average ($1 billion from 2004 to 2009). However, this aid is fragmented and insufficient to meet the challenges that the DRC must take up (it represents approximately $15 per capita).
The Bank will pursue its strategic partnership with other donors. It has taken the lead in developing joint project implementation mechanisms to reduce the cost of doing business and avoid overburdening already weak government capacities. An illustrative case is the joint implementation unit for energy sector programs funded by the Bank, the AfDB, and the European Investment Bank (EIB).
Last Updated: Jul 08, 2014
Around The Bank Group
Find out what the Bank Group's branches are doing in Congo, Democratic Republic of.