The first IDA budget support since 2005 arrived with decrees already signed and triggers still to meet.

By Kanisa Magazine · June 2022

The World Bank’s board approved a $250 million development-policy operation for the DRC on 28 June 2022, the first IDA budget support to the country since 2005. Unlike a road or a clinic, it buys no asset. It pays the Treasury once the government has done specific things, and in this case most of those things were done in the three months before approval.

That sequencing is the useful part. Prior actions are decrees, orders and publications that exist before the money moves, so a reader can check what changed and judge how much of it will survive a change of minister.

The eight prior actions

Treasury, revenue, royalties, telecoms, state firms, forests and climate, in decree form.

The Bank’s programme document lists them. A decree of 31 March created a General Directorate of Treasury and Public Accounting, published on 2 May. A decree of 4 May made the LOGIRAD revenue system compulsory for the non-tax revenue agency DGRAD. A decree of 13 May set how mining royalties are shared. The telecoms law of September 2021 is counted as the fourth action. State firms must now publish annual reports within three months and audited accounts within six months and a week. A 2021 inspectorate report on forest concessions was published in April, and a 6 May order mandates a biennial deforestation assessment. A decree of 13 May created a National Framework for Climate Services.

The royalty decree in numbers

Provinces take 25 per cent, local entities 15 per cent and a future-generations fund 10 per cent.

The 2018 Mining Code gave the central government 50 per cent of royalties, the provinces 25, the decentralised territorial entities 15 and the Fonds Minier pour les Générations Futures 10. Decree 22/20 of 13 May finally sets out how provinces and entities receive and account for their shares, with quarterly and annual public disclosure. The Bank estimates central-government royalties at about $550 million in 2021, around 1 per cent of GDP, and says that with mining revenue near 3 per cent of GDP, under-collection of 50 to 80 per cent could leave $0.8 to 1.4 billion a year uncollected. DGRAD, which collects around 17 per cent of revenue largely by hand, is the weak link.

How a policy loan works

Cash follows reforms already done, then a second tranche follows the next list.

The mechanism differs from project finance. Disbursement goes to the budget, conditional on the prior actions, and a second operation depends on indicative triggers: LOGIRAD deployed in at least five provinces including Kinshasa, Lualaba and Haut-Katanga and in five revenue-collecting institutions including the Ministry of Mines, SOE annual reports for 2021, and implementing decrees for the telecoms law. The Bank also notes that it set the series alongside the IMF programme, which gives the conditions a second enforcer. The Bank’s press release describes the package as part of $750 million approved the same day.

Why now

Commodity revenue gave the reforms a fiscal cushion and a reason to be credible.

The World Bank’s May economic update records domestic revenue climbing from 8.7 to 11.2 per cent of GDP across 2021, a year that closed with balanced accounts, and projects a 2022 deficit near 2.7 per cent as fuel and food support rises. A government with falling mineral dollars would struggle to sustain transparency reforms. A government with rising ones can afford to widen the base. The BCC’s digest of 22 June shows Kinshasa inflation near 8 per cent, which makes budget discipline harder to hold.

What businesses should do with the list

Treat the triggers as a calendar and reconcile payments to the new accounts.

Mining companies should reconcile royalty payments with provincial and local accounts as soon as those channels open, because disclosure will make mismatches visible. Suppliers to SNEL and REGIDESO should watch the competitive recruitment of their leadership, since new managers will reopen procurement. Telecom investors should read the decree list for infrastructure licences. Everyone who pays non-tax charges should expect the LOGIRAD system to arrive in their province, and should ask now which receipts and references it will require.