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The Democratic Republic of the Congo scores high on growth, lags in poverty reduction
![The Democratic Republic of the Congo scores high on growth, lags in poverty reduction The Democratic Republic of the Congo scores high on growth, lags in poverty reduction](https://wsrv.nl/?q=95&w=850&url=//www.tralac.org/images/primary/8308/_thumb3/congo-children-panning-for-gold.jpg)
The Democratic Republic of the Congo exemplifies the difficulty that many developing countries have in transforming mineral wealth into inclusive growth.
The IMF’s latest annual economic assessment indicates that while growth rates for 2014 were as high as 9.2 percent, poverty rates in the DRC are still among the highest in the world. And while the report notes some social improvements, like better access to education, it’s unlikely the DRC will achieve any of the Millennium Development goals.
Key Issues
Despite DRC’s abundant natural resources and its robust growth and overall strong macroeconomic performance of the past five years, fiscal space remains limited and poverty widespread. While key social indicators improved, DRC will likely not achieve any of the Millennium Development Goals (MDGs) by 2015. Implementation of past policy recommendations was broadly satisfactory, but progress on critical structural reforms has stalled. DRC remains a fragile country with vulnerabilities on the rise.
Outlook and risks
The outlook is favorable but vulnerable to adverse developments in commodity prices and spending pressures in the period leading to the 2016 presidential elections. A low foreign exchange reserves cushion leaves the economy vulnerable to external shocks. In addition, continued delays in adopting some economic legislations and lingering insecurity in parts of the country are also sources of risk.
Key challenges
The main challenges in the short to medium term are to: (i) address competing demands given the limited budget resources in 2015-16, (ii) build more buffers to withstand possible shocks from both external and domestic sources, (iii) diversify the economy and make it more inclusive, and (iv) maximize the benefits to the population of natural resources exploitation.
Policy recommendations
The authorities are urged to move swiftly to meet these challenges in order to preserve the hard-won gains and address rising inequality. In particular, they need to: (i) step up domestic revenue mobilization, (ii) reinforce the de-dollarization process and accumulate more international reserves; (iii) remove bottlenecks to private sector activity, (iv) strengthen governance and enhance transparency in the management of natural resources, and (v) implement the measures identified in the 2014 Financial Sector Assessment Program (FSAP) aimed at promoting both the soundness and inclusiveness of the financial system.