(Bloomberg) -- The Republic of Congo will begin implementing reforms next year aimed at boosting revenue collection to help end a cash shortage that resulted in the government restructuring its domestic debt, Finance Minister Jean-Baptiste Ondaye said.
The authorities will implement policies to strengthen governance in public enterprises and boost the collection of dividends from those entities, increase transparency in the management of tax receipts, and modernize administrative processes, Ondaye said in an interview. The reforms are being executed with assistance from the International Monetary Fund and other foreign donors, he said.
“Optimizing tax revenue collection is among our top reform priorities, particularly under our program with the IMF,” he said by phone on Nov. 22. The authorities will focus on the use of “modern tools and enhanced coordination between the various administrations involved,” Ondaye said.
Congo’s tax-to-gross domestic product ratio was 9.2% last year — below the 11% average for sub-Saharan Africa, according to the IMF. Revenue slumped in the wake of the 2014 oil-price collapse, a decline that was exacerbated by the Covid-19 pandemic and the impact of Russia’s war with Ukraine, which has spawned cost-of-living crises in Congo and other African nations.
The squeeze on Congo’s state finances has led to a cash shortage that’s resulted in the non-payment of public-servant salaries and forced the government to implement money-saving measures including a ban on foreign travel.
President Denis Sassou-Nguesso is “doing all he can” to improve the situation, government spokesman Thierry Moungalla said in a separate phone interview.
Earlier this month, the Congolese authorities concluded an exchange of its regional loans that’s expected to save the government 700 billion CFA francs ($1.1 billion) in debt-service costs over the next four years.
S&P Global Ratings upgraded the outlook on Congo’s debt to stable from negative in the wake of the debt exchange. “The stable outlook balances our view of Congo’s improved amortization schedule against risks stemming from its limited ability to secure funding and broader macroeconomic vulnerabilities,” the company said in a statement on Nov. 19.
The debt exchange enabled the country to “immediately mobilize” 250 billion francs, Ondaye said.
“This cash injection is a clear indicator of investor confidence in our ability to meet our commitments and implement bold and effective reforms,” the finance minister said.
(Corrects to remove a photograph depicting the wrong country flag in a story published for online readers.)
©2024 Bloomberg L.P.