Western donors will begin releasing over $200m (€156m, £139m) of emergency loans to the Democratic Republic of Congo in the next three weeks to prevent the government seizing up as it runs out of dollars, according to an International Monetary Fund official.
By Barney Jopson in Nairobi
The funds are set to be released in spite of donor opposition to parts of a $9bn minerals-for-infrastructure deal that Congo has signed with China, which is holding up poverty reduction programmes financed by traditional western donors.
Congo has been hit harder and faster by the global financial crisis than other African countries owing to its heavy dependence on mining and oil, as well as the confluence of last year’s falls in commodity prices with a costly conflict in its eastern provinces.
The events have created a fiscal emergency as government revenues from tax and state joint ventures shrink, causing foreign currency reserves to plummet to just $32m by February 13 from an average of around $250m before the crisis last year, according to the central bank.
In the real economy confidence has been shattered: the Congolese franc has weakened sharply against the dollar, inflation is rising, millions of people are being pushed deeper into poverty, and fears of social unrest are rising.
Brian Ames, the IMF’s country director for Congo, told the Financial Times he expected donors to begin dispersing funds at the end of this month or in early March so the government could pay for public sector imports and service its external debt.
He said the IMF board would meet next month to consider a loan of up to $200m under the rapid access component of a facility designed to help countries manage the impact of “sudden and significant exogenous shocks”.
Late last year the IMF downgraded its 2009 economic growth forecast for Congo to 4.5 per cent from 11 per cent prior to the global financial crisis.
The World Bank is considering providing a further $100m. An EU official said the European Union was considering a loan of €50m ($64m, £44m).
“The sense of urgency is increasing by the minute,” said one western diplomat in Kinshasa.
No direct conditions are attached to the IMF’s exogenous shock facility, but the Congolese government’s need to curry favour with western donors to access short-term funding has already compromised its commitment to its $9bn deal with China.
The IMF and the Paris Club of creditors have pressed Congo to alter the deal because its provisions give China priority access to state financial guarantees.