IMF and World Bank ready to extend debt relief to Congo
Michael Dynes
After years of seemingly deadlocked negotiations, the IMF and World Bank are now ready to come to the aid of the Democratic Republic of Congo (DRC) - the vast and potentially mineral-rich central Africa state still fighting to emerge from the ravages of decades of debilitating dictatorship and war
The death in 1997 of Mobutu Sese Seko, who saddled the country with an $11 billion foreign debt, plunged the impoverished country into two back-to-back wars, which only formally came to an end in 2002. It has been struggling ever since to put itself firmly on the path of post-war reconstruction - and largely failing.
A breakthrough seemed to appear in 2007 when China announced that it has signed a $9 billion dollar resource-backed finance deal with President Joseph Kabila's fledgling government - the biggest yet agreed by China anywhere in Africa - in which $3 billion was earmarked for the development of copper and cobalt mines, and $6 billion would be spent on building new roads, railways hospitals and universities.
The IMF and World Bank, however, cried foul. The Washington-based institutions, with the backing of the Paris Club of official creditors, expressed their opposition to granting Kinshasa debt relief, only to see it pile up new debts with China on non-concessional terms. China, they said, was seeking the status of a privileged creditor.
They wanted any loans extended by China to the DRC to be made concessional, and the guarantee that any gap between profits from the copper and cobalt mines and the cost of infrastructure would be met by the state to be dropped. China refused to budge. So did the IMF and World Bank. DRC was caught in the middle - and Kabila was left hanging by a thread - few thought he would survive.
In August the Chinese blinked. The resource-backed finance deal was shrunk from $9 billion to $6 billion - $3 billion for the mines and $3 billion for infrastructure, and state guarantees for the loan were withdrawn. Within hours the IMF and World Bank pronounced that the Sino-Congolese deal was acceptable, opening the way for debt relief and aid to follow.
Talks can now begin between Kabila's government and its former creditors on writing off some or all of the DRC's Mobutu-era debt under the provisions of the Highly Indebted Poor Countries Initiative, along with a urgently needed programme of budgetary support and country-wide poverty reduction initiatives. The green light from the IMF will also open up access to other bi-lateral creditors who will not move without the IMF's say so.
Nine months ago, Kabila seemed to be dead in the water. Renewed rebellion in the eastern DRC, combined with the impact of the global economic downturn - which forced most of the country's mines to close or be put on care and maintenance status - led most observers to believe that a renewed descent into war was only around the corner.
In that time the DRC's prospects have been completely transformed. The revised Sino-Congolese deal has received a Western stamp of approval, large amounts of debt relief are on the way, and a signal has been sent out to the international donor community that the DRC needs its help. Now that copper prices have hit a ten month high, the DRC now has a better chance of emerging from chaos than at any time since Mobutu's death.
