Congo Economic Update, Third Edition, September 2016 : Adjusting for Better Social and Economic Development in an Era of Low Oil Prices

The decline in international oil prices over the past two years has resulted into an economic crisis in the Republic of Congo that could forestall the transformation efforts to move the country towards higher middle income status. A key strategy that government has pursued in recent years has been to adjust the fiscal policy to provide more resources for capital development in line with the National Development Plans. This strategy is expected to be continued into the medium term in order to address the binding constraints on growth, most notably the country’s huge infrastructure deficit. However, the intention to increase the level of capital investment has neither been matched by similar ones to raise investments in human capital development nor with effort to make public spending more efficient and effective. This third Edition of the Congo Economic Update discusses the importance of undertaking fiscal adjustments to accommodate the new reality of lower oil revenues and to shift into a more balanced and inclusive development strategy. This edition argues that the current fiscal crisis in Congo resulting from the decline in global oil prices will make it difficult for the country to sustain fast growth unless the country adopts more prudent fiscal management and a balanced approach that builds both physical capital and achieves significant improvements to human capital. Therefore, a deliberate effort has to be made to ensure that the fiscal adjustments do not result in major decreases to the level of expenditure on health and education. In addition, the government must implement measures to improve the level of efficiency and effectiveness of spending in these sectors.