35717 REPUBLIC OF CONGO CHAIRMAN'S SUMMINGUP President's Memorandumand Recommendationand Decision.Point Document Under the Enhanced Heavily IndebtedPoor Countries(HIPC)Initiative February 24,2006 The Executive Directors met to considertheHIPCDecisionPoint document, prepared jointly by the staffs of the IMF and IDA, and the Memorandumof the President of IDAto its ExecutiveDirectorspertaining to Assistanceto the RepublicofCongo under the Enhanced HIPC Debt Initiative. DirectorssupportedtheoverallassessmentandacknowledgedtheRepublic of Congo's satisfactoryprogress in building a track record of macroeconomic stability and structural policy implementation, in deliveringtheinterimpovertyreductionstrategy paper which was consideredby the Board in December 2004, and significant progressin normalizingrelationswithcreditors.Notingtheirdecision of August 25, 2005atthe discussion of the preliminary document, Directors agreed that the Republic of Congo's continuedprogress in implementing its macroeconomicandstructuralreformprogram was such that the country had met the conditions for proceeding to the Decision Point. In this regard, Directors notedtheprogresstheauthoritieshaveachievedtodate,notably through theparticipationin the Extractive Industry Transparency Initiative (EITI), as well as in strengthening public expendituremanagement.Whilewelcoming this progress, Directorsstressedthatfurtheractiontoimprovegovernanceandtransparencyinthe management of state oilrevenuesand to reducecorruption in generalisessential to enable Congo to reach its development objectives andthe MDGs. Directors stressed the critical importanceof full ownership of the reform processby Congo anda close dialogue betweentheBank, the authoritiesanddevelopmentpartners.In this generalcontext, Directors noted the broad consensus on the need to fight corruption and promote good governancethrough the Bank'soperations. They acknowledgedtheinitiativealready underway to prepare clear,transparentandequitableguidelinesandlookedforwardto further discussion onthis issue. Issues of timing and process were also discussed. The specific conclusions of today's discussion can be summarized as follows: Eligibility. Directors agreed that accordingto estimates presentedin the Decision Point document, the Republicof Congo'sNPV of external debtis above the HIPC threshold of250 percent of revenues at end-2004, after taking into account the full use of traditional debt relief mechanisms. On this,basis, Directors agreed that the RepublicofCongodoesqualifyforEnhancedHIPCassistance,given its track record of performance under IDA and IMF-supported reform programs, and its current status as an IDA-only and PRGF-eligible country. e Approval of Interim Relief. Directorsapprovedtherecommendation in the President'sMemorandumandRecommendationpertaining to thegranting of interim debt relief once Congo reaches the Decision Point. e Proposed Floating Completion Point Triggers.Directors reached agreement on the triggersforreachingthefloatingcompletionpoint.Theyagreedthatthere should be annualreviewsofprogressagainstthestandard of sustained performance asset out in the completion point triggers,on the basis of reviewsby IDA and IMF staffs.Directorsstressedtheimportance of theprinciplesofthe EnhancedHIPCInitiative,whichaim at providingtheproperincentivestothe country to implement the reforms required foran early access to irrevocable debt reduction. They concurredwiththeprinciple of sustainedperformanceand emphasizedtheneed to put in placepermanentmechanismsforexpenditure tracking in general and poverty related expenditure in particular; specifically: (i) the budgetsavingsresultingfrominterimreliefshould be lodged in a special account;(ii) the expendituresfinancedfromthespecialaccountshould be pro- poor in nature andalignedwithI-PRSPandPRSPpriorities,and(iii)such expendituresshould be monitored by an independentoversightcommittee includingrepresentativesfromparliament,internationaldonorsandCongolese civil society,and subject to annual independent published audits. 0 Petroleum Sector. Executive Directors stressed the utmost importance attached to sustained performance of (i) the independent oil revenue certification process on a quarterly basis, as well as annual reconciliation with Treasury receipts; and (ii)successiveannualauditopinionsforSNPC by reputedinternationalaudit firmsandcertified,i.e.reviewedandassessed, by thenational anti-corruption committee. Furthermore, accounting practices within SNPC shouldbe brought up to international standards as a matter of urgency. To this end, as a sign of good faith, the authorities have agreedto provide to KPMG, as well asto IDA and IMF, the documentation that had been requestedby KPMG while undertaking the2004 oil revenue certificationprocess. e Governance. Directorswereequallyinsistent on theneedforCongo to undertake and fully implement the recommendations of the governance study to be undertaken by international experts and certified, i.e. reviewed and assessed, by the national anti-corruption committee. e Commercial Creditors. ExecutiveDirectorsstressedtheimportanceofthe Republic of Congo reaching agreement with these creditors on terms similarto those grantedby the Paris Club in the context of the HIPC initiative. The ChairmancommendedtheBoardforthedifficultworkthatproduced an outcomethatpromoted all threeobjectives;(i)thatCongoshouldqualifyforthe HIPC Decision Point that will benefit the poor people of that country, (ii) that the Bankapplaudedandencouragedthereformsunderway,andcommittedtobythat Government, (iii) thatthereshould be sustainedperformanceundertheagreed standards in order to reach the Completion Point. The Chairman suggested that these three key points be emphasizedin public explanationsof the Board's decision. Approval of therecommendations in theDecisionPointDocumentregarding Congo's eligibilityfor assistance under the Enhanced HIPC Debt Initiative, the Decision Point for Congo, the overallNPV debt relief required, and the conditions for reaching the floating completion point is also required from the Executive Board of the IMF for the approval reachedby the IDA Boardon February 24, to become effective.