IMF Ready to Lend $1 Billion to Democratic Republic of Congo

IMF Ready to Lend $1 Billion to Democratic Republic of Congo

Written by Malcolm Beith and Paul Richardson | From Bloomberg News

The International Monetary Fund is ready to provide a $1 billion loan to the Democratic Republic of Congo when it resumes lending after a two-year suspension as the central African nation prepares for elections.

IMF officials plan to travel to the country next month for talks with the government, which hasn’t formally requested funding from the Washington-based lender, Resident Representative Oscar Melhado said on Tuesday in an interview in the capital, Kinshasa. The IMF halted about $225 million in planned loans in 2012 over the state’s failure to fully disclose details of an asset sale by state-owned miner Gecamines.

The IMF and the government have improved their relationship since more specific parts of that contract were revealed during talks in mid-2013 and analyzed by the lender’s legal department, said Melhado.

“There has been no formal request for a program, but we are in good relations with them,” Melhado said. “About $1 billion would be available.”

Congo is preparing for provincial elections by December and a presidential vote in November 2016, which together will cost $1.1 billion, or more than 10 percent of its annual budget, according to electoral authorities. Holding the vote will be a logistical challenge in a country of 68 million people about the size of Western Europe, which has less than 3,000 kilometers (1,860 miles) of paved roads and is considered by the United Nations as the least-developed nation in the world.

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Opposition leaders have expressed concern that President Joseph Kabila will try to seek a third term by changing the constitution or prolong his mandate by delaying elections. Kabila will step down in 2016 after the end of his second term, government spokesman Lambert Mende said last week.

Negative Expectations

Investor confidence has been damaged by protests last month that left at least 40 people dead in Kinshasa and several other Congolese cities over the possibility of Kabila extending his tenure, Melhado said. The demonstrations were called off after four days when the Parliament voted to amend legislation so that it no longer contained a requirement to carry out a census before elections, which would have delayed the vote.

The sentiment of private industry has turned “negative and pessimistic,” Melhado said.

The country, which has some of the world’s richest mineral deposits, is the biggest producer of cobalt globally and the sixth-largest copper miner. The economy, which is forecast by the IMF to expand 9.1 percent in 2015 compared with 9 percent last year, will be able to withstand a drop in commodity prices as the production forecast has been maintained, said Melhado.

The price of copper has declined about 8 percent this year on concern that demand for the metal is waning in China and Europe and amid forecasts for a global surplus.

Agriculture has also been a main factor driving growth in Congo, whose major food crops are cassava, sugar and bananas.

Backburner Economy

Kabila’s economic agenda has been sidetracked by political developments before the elections, such as the appointment of a new cabinet in December to form a more inclusive government, which includes several opposition members, Melhado said.

That shift in focus means that proposed changes to the mining code, which have been debated since 2013, may face further delay, he said. A draft of the new code submitted to the government may be discussed by lawmakers at the next parliamentary session that starts in mid-March, Mines Minister Martin Kabwelulu said last week. The country wants to increase its income by raising royalties and taxes for miners, which include Glencore Plc and Freeport McMoRan Inc.

“In 2011 and 2012, boosting growth was at the top of the agenda,” Melhado said. “Now it’s the political cycle.”

The government should try to increase tax collection to help boost public finances, he said, citing the need to address falling value-added tax income as a share of gross domestic product. The country could increase its reliance on more predictable revenue streams than commodities to lessen the influence of price swings, the IMF said in December.

Congo is not bringing in “enough revenue to finance its huge needs,” Melhado said.