DR Congo: improved public finances for greater self-reliance

Through our FPS and Enabel, Belgium is assisting the Democratic Republic of the Congo to improve the management of its finances. Some of the ways they are doing that involve identifying businesses more effectively, increasing VAT revenues and introducing a more targeted multi-year budget. This should ultimately lead to a better distribution of wealth for the benefit of the population.

If a country wants to fund its own development in a stable way, it needs robust financial management. On the one hand, this means that taxes must be collected correctly and, on the other hand, that its spending is strictly planned and monitored. In order to do that, however, what you actually need is sufficient capacity and expertise.
 

200,000 to 400,000 taxpayers

In DR Congo, for example, taxes are mandatory for both individuals and businesses. A system of value-added tax (VAT) and numerous other taxes apply. In short, DR Congo has, on paper, a comprehensive system of taxation.

Nevertheless, it is presumed that only 200,000 to 400,000 individuals and businesses are paying taxes, out of a population of 90 million. This is partly because many businesses are informal. In addition, the state is experiencing difficulties in identifying taxpayers.

Furthermore, individual citizens, for their part, also have little faith in the state. The country's money is being spent in a non-transparent manner, while citizens are left with the impression that its poor infrastructure and facilities are not improving. The business climate is also poor as a result of excessive fiscal controls. Businesses and individuals are therefore suspicious of the tax authorities.
 

Public finance reform

The government of DR Congo absolutely wants to change that. In 2021, the government launched a strategic plan to thoroughly reform the country's public finances. For that matter, whenever the International Monetary Fund (IMF) grants funds to DR Congo, it invariably makes it a condition that the country get its financial management in better order.

That is why the government of DR Congo asked Belgium to help support these reforms as part of their cooperation programme. The Belgian Agency for International Cooperation (Enabel) therefore launched a ‘financial governance’ programme that began in 2023 and will run until 2027.
 

Data mining

The programme includes two major components: improving the collection of taxes, on the one hand, and ensuring that spending is planned in a more structured way on the other. In order to collect taxes, you first need to know which businesses actually owe taxes. To track them down, Enabel was able to call on a data mining expert from the FPS Finance. This close collaboration between a Belgian and Congolese administrative body is looking promising and may eventually bring in additional resources.

Improving the VAT system is another way of adding more money to the coffers. In addition to the efforts of the FPS Finance, Enabel has hired two international experts for that purpose who will spend eighteen months working at DR Congo's Directorate General of Taxation. The aim of this is to make it possible for businesses flying under the radar of the tax authorities to be tracked down more effectively and to enable the Directorate General itself to become more efficient when carrying out checks.
 

Annual performance reports

The second major component of the programme sets out to make spending more efficient. Or, to express this in specialist terms: to introduce a system of management that is focused on results. For example, we no longer want a budget that allocates resources by type, such as personnel, investment, and the purchasing of services and goods, but rather allocates them purposefully to development programmes such as sustainable agriculture, child health, and road maintenance. In addition, the budgetary framework must now span a period of several years.

The government must also be held more accountable for its spending. The state and the ministries must therefore be required to draw up – and present to parliament – an annual performance report showing how they have used the budget. That happened for the first time last year and it represents a milestone that was achieved thanks to Enabel's help!

Furthermore, you can only spend your money well if you keep detailed records of the amounts you have spent and on what. In other words, the state must have a proper system of public accounting. Following a test phase, a revamped accounting system will gradually come into operation.
 

Scrutiny by citizens

In addition to those two major components, DR Congo has another arrow in its bow in order to boost financial management: enhanced scrutiny. In order to achieve that, Enabel is working with civil society in DR Congo.

The partner organisations concerned are delving into how the government of DR Congo is spending its money. To do that, they rely on published documents and on investigations in the field. Are the funds being allocated to the activities and investments being planned? Have those activities and investments been carried out correctly and in accordance with the applicable rules? The work carried out by those NGOs therefore makes it possible to bring any misappropriation or mismanagement of public funds to light.

Enabel also organises training for DR Congo's parliamentarians to enable them to exercise greater scrutiny of the country's public finances. At the request of the Court of Audit of DR Congo, Enabel also hopes to cooperate with the Court of Audit of Belgium. The Court of Audit is the institution specifically dedicated to carrying out external scrutiny of the budgetary, accounting, and financial operations of the state, down to the level of the provinces.

Enabel also played a part in the creation, by the Ministry of Finance of DR Congo, of a promotional strategy to instil a greater sense of public responsibility into the country's taxpayers. But to truly get the people of DR Congo on board, the people themselves must first regain their confidence in the state and be able to see that things are really changing.
 

Fragile

Fortunately, the economic and financial stars are very well aligned at the moment. The country is recording economic growth of 5-6%; inflation has fallen to 2% and the Congolese franc is stable. The budget deficit is also under control. Moreover, the country is managing to secure international loans fairly easily on good terms, as it did recently in the form of a $1.25 billion Eurobond. The IMF congratulates the DR Congo state on those results time and time again.

Still, the situation remains somewhat fragile. The country's growth remains largely dependent on mineral resources. Though prices in that particular sector are good at the present time, that in itself does not form any guarantee for the future. What the economy of DR Congo therefore urgently needs is diversification.

In addition, the ministries – due to the war in eastern Congo – frequently rely on expenditures approved during emergency proceedings and there is little scrutiny in such cases. That is why the IMF is asking DR Congo to ensure that only 10% of its spending is made using proceedings of that type.
 

Sustainable results

Whatever the case, the input that Belgium is providing via Enabel is giving DR Congo the tools it needs to ensure that its finances are managed more effectively. The goal is to achieve sustainable results. For example, Belgium's public finance expert is based within the reform body of the Ministry of Finance of DR Congo and is therefore working directly with Congolese colleagues.

In the remaining time – until the end of 2027 – Enabel plans to complete the various projects and roll them out in the provinces involved in priority development corridors. Ultimately, DR Congo is going to have much more autonomy to collect and manage its finances, which is an absolute must-have in order to ensure truly sustainable development.

By the way, the fact Belgium is doing a great job is also being noticed by other donor countries. For example, Belgium, along with the United Kingdom, is currently the co-chair of the donor group for public finance.