POST-REUNIFICATION ECONOMIC RECOVERY CREDIT

closed

The Post-Reunification Economic Recovery Credit (PRERC) for the Democratic Republic of Congo is consistent with the Bank's Transitional Support Strategy (TSS) discussed by the Board on July 31, 2001 and is an integral part of a new TSS to be discussed by the Board concurrently with this credit on February 26, 2004. It would assist the Democratic Republic of Congo in its economic and social recovery, in the context of the Government's 2004-2005 Reform, Growth, and Poverty Reduction Programs. Proceeds of the proposed credit would provide funds necessary to assist the Democratic Republic of Congo with foreign exchange needs. The Credit will support policies that stabilize the economy and pave the way to environmentally and socially sustainable growth and poverty reduction through a number of interventions. The primary risks-and associated mitigating measures-are (i) renewed internal and or regional conflict, which is reduced by UN intervention and by a Bank-led multinational regional demobilization and reintegration program; (ii) the DRC's accruing new arrears on external debt because of the increased debt service burden in the short run, even though the overall debt burden in net present value terms has been reduced greatly; (iii) the DRC losing international financial support, with consequences in the country's ability to service debt as well as in financing necessary spending on social and economic rehabilitation, which is mitigated by the International Development Association (IDA's) working with other donors to assure a continued high level of donor financing and providing guidance for the measures, including the Poverty Reduction Strategy Paper process, that will make permanent the debt service reduction that followed the HIPC Decision Point; (iv) insufficient institutional capacity, which is being addressed by technical assistance and capacity-reinforcing activities provided by IDA, the International Monetary Fund (IMF), United Nations Development Program (UNDP), the African Development Bank (AfDB), and others; and (v) private sector response falling short of expectation, which is mitigated by activities by IDA and other donors to improve the investment climate.