- Congo’s IMF Talks Progress but Stop Short of Staff-Level Agreement
The Republic of Congo and the International Monetary Fund have made “significant progress” towards a new financing programme, but discussions concluded without a staff-level agreement as the two sides continue negotiations over debt sustainability, domestic arrears and fiscal reforms.
An IMF team led by Pilar Garcia Martinez visited Brazzaville from September 24 to October 7 to discuss economic and financial policies that could be supported under a new Extended Credit Facility arrangement.
The mission also conducted discussions for the country’s 2026 Article IV consultation, the IMF’s regular assessment of member countries’ economies and policy frameworks.
“The IMF team held constructive discussions with the Congolese authorities on economic and financial policies that could be supported by a new arrangement under the Extended Credit Facility,” Ms Garcia Martinez said at the end of the mission.
Unlike an agreement announced by the Fund, the conclusion of constructive discussions does not guarantee that Congo will receive new financing. The IMF and the government must first resolve the remaining policy issues and reach staff-level agreement before any programme can be submitted to the Fund’s Executive Board for approval.
The two sides are expected to continue negotiations over the coming weeks.
The negotiations focused heavily on Congo’s public finances, including the 2026 fiscal outturn, the draft 2027 budget and the government’s strategy for clearing domestic arrears.
Domestic arrears arise when the government fails to pay contractors, suppliers, workers or other creditors when obligations fall due. Although they may not always appear immediately as conventional public debt, accumulated arrears can weaken businesses, destroy jobs and transmit the government’s liquidity problems into the wider economy.
For private companies dependent on public contracts, delayed government payments can make it difficult to pay workers, service bank loans or finance new projects. A credible arrears-clearance plan could therefore support both fiscal transparency and private-sector recovery.
However, settling old obligations while preventing new ones will require more than additional IMF financing.
The Fund is seeking stronger revenue mobilisation, improved expenditure management and tighter commitment and cash controls. These measures are intended to prevent ministries and public agencies from entering spending commitments without confirmed budgetary resources.
The objective is to ensure that arrears clearance does not become a recurring exercise in which the government settles one stock of unpaid bills while accumulating another.
“The engagement with the authorities focused on recent economic developments, budget execution in 2026, the draft 2027 budget, and measures to strengthen fiscal resilience and enhance debt sustainability,” Ms Garcia Martinez said.
She added that discussions covered “stronger revenue mobilisation, improved expenditure management, enhanced commitment and cash controls, and efforts to prevent the accumulation of arrears”.
The IMF and the Congolese authorities also discussed rationalising tax expenditures — the exemptions, deductions, reduced rates and other preferential treatments that lower the amount of revenue collected by the state.
Tax incentives are often presented as instruments for attracting investment, but poorly targeted exemptions can narrow the tax base, create unequal treatment among businesses and provide limited economic benefit relative to their fiscal cost.
For Congo, reducing unjustified tax expenditures could create additional revenue without necessarily introducing new taxes or increasing statutory rates.
The difficult policy choice will be distinguishing incentives that support productive investment from concessions that primarily benefit politically connected companies or established commercial interests.
Reforming tax exemptions could consequently face resistance even if it makes economic sense.
The IMF’s emphasis on revenue mobilisation also highlights the limitations of relying heavily on hydrocarbons. Oil revenue can strengthen public finances when prices and production are favourable, but it exposes the budget to external shocks and can weaken incentives to develop broader domestic taxation.
A durable fiscal framework will require Congo to collect more predictable revenue from non-oil activity while ensuring that the tax burden does not suppress private investment.
The mission identified electricity-sector operations as an important source of fiscal risk and a constraint on economic growth.
Weak electricity systems can affect the economy through several channels. Operational losses, subsidies and unpaid obligations can increase pressure on the national budget, while unreliable power raises production costs for businesses and discourages investment.
Companies forced to rely on private generators face higher operating expenses, reducing their competitiveness and ability to expand. Electricity shortages can therefore weaken the same private sector the government expects to drive diversification away from oil.
The IMF said discussions covered policies to address fiscal risks linked to electricity-sector operations while improving Congo’s business environment and promoting private investment.
Any reform will require a careful balance. Improving the financial position of the electricity sector may involve better revenue collection, reduced technical losses, stronger governance or changes to tariffs.
But tariff adjustments introduced without service improvements or protections for low-income households could deepen hardship. The authorities must therefore reconcile financial viability with affordability and reliable access.
The prospective IMF programme is expected to combine fiscal consolidation with measures to protect vulnerable households.
That commitment will be important because policies aimed at strengthening debt sustainability can involve spending restraint, subsidy reforms and tighter controls on government programmes.
If poorly designed, such measures could shift the cost of adjustment onto households with the least capacity to absorb it.
The effectiveness of social protection will depend not only on budget allocations but on whether assistance is accurately targeted and delivered on time. Weak administrative systems could reduce the impact of even well-funded programmes.
At the same time, continued fiscal instability also carries social costs. Debt distress, arrears and uncontrolled spending can weaken public services, delay salaries and reduce the government’s ability to respond to economic shocks.
The policy challenge is therefore not simply to choose between fiscal discipline and social protection, but to design an adjustment that makes public finances sustainable without undermining essential services and household welfare.
The conclusion of the Brazzaville mission leaves Congo at an important but incomplete stage of its IMF engagement.
Significant progress suggests that the two sides have narrowed their differences. However, the absence of staff-level agreement means important programme conditions or financing assurances may still require further negotiation.
“The IMF team and the authorities will continue their discussions in the coming weeks, with a view to reaching a staff-level agreement,” Ms Garcia Martinez said.
The next phase will test the government’s willingness and capacity to convert broad reform commitments into measurable actions within the 2027 budget and supporting policy framework.
For Congo, a new IMF programme could provide financing, strengthen confidence among development partners and create a framework for addressing arrears and debt vulnerabilities.
But the deeper test will be whether the reforms change the way public money is managed.
Clearing arrears without preventing new ones, increasing revenue without addressing inefficient exemptions, or reforming electricity finances without improving power supply would offer only temporary relief.
The eventual agreement will therefore matter less for the size of the first IMF disbursement than for whether it creates a credible route from oil dependence, unpaid government bills and fiscal vulnerability towards a more diversified and investible economy.
