IMF pushes for single treasury account, tax reforms in Congo in new $2.9bn deal

Under the new agreement, which will see the DRC receive $1.77 billion from the IMF’s Extended Credit Facility (ECF) and, for the first time, $1.1 billion from its special climate-focused Resilience and Sustainability Facility (RSF), Kinshasa will need to expedite the rollout of the TSA and implement a raft of tax reforms to continue accessing the funds.

“A key priority under the planned ECF-supported programme is to ensure stricter adherence to the public expenditure chain procedures,” said Calixte Ahokpossi, the IMF mission chief for the DRC.

“Related reform priorities include operationalising the Treasury (DGTCP) and the Treasury Single Account, gradually decentralising spending authorisation to line ministries.”

A spot check by the lender has revealed that there are currently 3,625 accounts associated with the government, of which 607 belong to 54 ministries, 121 to State institutions, 2,608 supplementary budget accounts and 289 special accounts.

According to the IMF, the move to a single account will ensure the credibility of the budget and “contributes to curtailing the proliferation of taxes outside the Treasury Single Account, therefore improving tax policy.”

The Congolese government signed the decree defining the structure and parameters of the TSA in May 2023, “but much remains to be done to set it up, while cash management remains weak,” IMF said in an evaluation report published in July.

In addition to the TSA, the lender wants the DRC to decentralise authorisation of spending, a move meant to ease State expenditure’s impact on economic fluctuations, improve investments and social spending, boost buffers to shocks, and build fiscal credibility.

The lender also requires Kinshasa to increase domestic revenue mobilisation, “including by mainstreaming the standardised VAT billing system, streamlining inefficient tax exemptions, curbing tax evasion through strengthened oversight of mineral exports, further combatting customs fraud at the borders,” said Mr Ahokpossi.

These conditions are not unique to the DRC. The IMF has pushed other countries in the region to implement similar reforms, sometimes in the face of strong public opposition.

The TSA, for instance, has been implemented by Uganda and Tanzania at the behest of the IMF, while Kenya is currently in the process of rolling out it out.

In Kenya, the full implementation of the TSA is projected to have serious economic and financial implications, including the potential for at least nine banks to face into liquidity challenges as government agencies and departments withdraw deposits.

Read: Congo, Kenya top beneficiaries of IMF reforms

Tax measures meant to increase domestic revenue mobilisation proposed to Kenya by the IMF have also ben linked to the widespread deadly protests in Kenya in June, which led to the storming of parliament and resulted in several deaths and injuries.

The new funding, which is subject to approval by the IMF executive board, will help DRC restore peace and security in the troubled eastern parts, address the spiralling cost of living, and invest in infrastructure and priority social and agricultural sectors.