ANB-BIA SUPPLEMENT

ISSUE/EDITION Nr 345 - 01/05/1998

CONTENTS | ANB-BIA HOMEPAGE



Congo (RDC)

Monetary reform


by Tshibambe Lubowa, Congo RDC, March 1998

THEME = FINANCES

INTRODUCTION

Pre-conditions for the launching of the Congolese franc have still to be fulfilled

The Congolese people always seem to have the late President Mobutu Seseko's picture in front of them. How come? Ten months after the arrival of Laurent Kabila and the Alliance of the Democratic Forces for Freedom (AFDL), the Zaire (unit of currency) bearing Mobutu's face, is still used as the national currency, for both commercial transactions and financial operations. The monetary reform and the launching of the Congolese franc, first announced for 30 June and then re-scheduled for 31 December 1997, have still to be realised. But monetarist Tshinaza Mbiya puts it this way: Is it intended to have a monetary reform which will hopefully provide a remedy for Congo's financial woes, or a monetary reform designed to be Kabila's crowning achievement?

The Congolese franc - a myth

The Congolese franc has become a myth for the Congolese people. The Congolese are convinced that having a Congolese franc is the only way to get out of the abyss into which the bad monetary and financial mismanagement of Mobutu's Zaire has led them. In order to fully understand the real implications of this monetary catastrophe, let's take a look at hard facts.

When the Zaire was adopted as a unit of currency on 24 June 1967, the Zaire was worth two dollars. With the monetary reform of 22 October 1993, one dollar was worth three New Zaires, and one New Zaire was worth three million Old Zaires. Which meant - one dollar was worth nine million Old Zaires. On the eve of Kabila's entry into Kinshasa, one dollar was worth 185,000 New Zaires. Today it's worth 130,000 New Zaires. Just to show how worthless our currency is - the dollar which was worth 0.5 Old Zaires in 1967 is today worth 390 billion Old Zaires.

The population has lost all confidence in such a monetary system. The Sovereign National Conference had suggested that the Congolese franc should be brought back into circulation. The AFDL government then decided to go ahead with a new monetary system and call it - the Congolese franc.

Congolese francs and Congolese francs!

Mr Masangu, formerly director of City Bank/Congo, and now Governor of the Central Bank of the Congo has been able to convince Congo's political masters not to mistake the former Congolese franc - at that time, backed-up by a flourishing economy, with healthy public finances and a surplus balance of payments - with a Congolese franc they now want to launch in the midst of a completely collapsed economy.

When addressing a gathering of Congolese and Belgian businessmen, Mr Masangu insisted on the importance of re-establishing the Congolese franc, especially as far as the hopes of a whole population are concerned. He said: "Banks are again looking to be institutions where money circulates. Our economists are envisaging substantial injections of credit into the economy. We hope that hoarding will come to an end and perhaps also, the use of the US dollar as a parallel monetary unit. Civil servants hope they'll receive their arrears in pay and that in future their salaries will be paid regularly. Public opinion sees the arrival of the Congolese franc as an occasion to provide the economy with a stable, reliable and practical currency, accepted by everyone".

But there's a price to be paid. There must be a complete monetary reform which restores order in the monetary and banking sectors. Close on the heels of these banking improvements which have the World Bank's support, insolvent banks and financial institutions likely to upset the good running of the country's economic operations must be closed down - banks such as the Nouvelle Banque de Kinshasa, the Banque de Crédits Agricoles, the Banque Congolaise de Commerce extérieur, etc., are in this category.

To ensure stability vis à vis the new currency, the economic recovery and stability of the country's macroeconomic framework is necessary. The expected growth for 1998 is 2.5%. But the government is letting it be known that if this objective is to be realised, the authorities must strengthen Congo's economic stability, suppress administrative and judicial petty redtape, and improve the country's social and political climate.

Political obstacles

The Kinshasa authorities seem to be hell bent-on doing everything possible to prevent their own monetary reform from succeeding. There's the setting up of Courts Martial to try politicians, among these being Mathieu Kalele (Union for Development and Social Progress - UDPS); the suspension of all political activity and the primacy of the one-party state under the AFDL; many political personalities have been arrested - all of which are telling reminders of what took place in Mobutu's regime.

The governor of the Central Bank has reminded Belgium of its promise to finance the printing of the new currency. But, it's clear the Belgian government is in no hurry to hand over the necessary as long as a number of pre-conditions remain unfulfilled.

The Belgian government's position appears to be unchanging, and certainly conforms to the wishes of the fifteen members of the European Union - a decision published on 28 November and repeated on 5 December 1997. The differences between Congo RDC and its foreign friends seem to be of a political order; at all costs the AFDL must share the running of the country with other political tendencies. The USA government thinks along the same lines and has called on Congo's government to reduce state interference in the nation's political life and create a climate which will encourage foreign investment in Congo RDC.

President Kabila insists that Congo RDC needs to be helped urgently, without delay, and without constraints. But there are contentious political issues and technical restraints to be overcome. So, will the government be able to launch the Congolese franc? Jean-Claude Masangu is determined to carry out in record time, the pre-conditions for launching the Congolese franc. In government circles, the 30 June 1998 is spoken of as a definitive date for "blast-off".

END

CONTENTS | ANB-BIA HOMEPAGE | WEEKLY NEWS


PeaceLink 1998 - Reproduction authorised, with usual acknowledgement