Problems remain over Congo Chinese contract: IMF

KINSHASA – Congo and the International Monetary Fund have yet to resolve disagreements over a Chinese infrastructure-for-minerals package that is blocking much-needed debt relief, IMF Managing Director Dominique Strauss-Kahn said on Sunday.

Under the US$9 billion package signed early last year, cash-strapped Democratic Republic of Congo granted Chinese companies lucrative copper and cobalt concessions in exchange for the building of roads, railways, and hospitals.
IMF officials worry the contract, a key element of President Joseph Kabila’s post-war economic policy, will plunge the central African nation deeper into debt, and have delayed forgiveness of most of the US$10 billion Congo already owes.
Strauss-Kahn, who is in Congo on a three-day visit aimed at relaunching a formal programme there, told journalists after a meeting with Kabila and Prime Minister Adolphe Muzito that the two parties were still seeking a way out of the impasse.
‘I think that it’s possible, but it’s not certain … If we leave things as they are, there could be elements of contradiction,’ he said.
The IMF has said it will wait for the results of the Chinese contract’s feasibility study, expected next month, before it takes a decision on debt relief.
Congolese officials say the government will not incur any further debt as a result of the deal and that the projects are necessary to rebuild the vast country after decades of dictatorship and a devastating 1998-2003 war.
‘These two things are sometimes a bit difficult to put in place at the same time. That is why we must work on this. But I think that it is possible to get there. It’s not done yet. We’re not there yet,’ Strauss-Kahn said.
He said he hoped the issue of debt relief could be resolved in the coming weeks.
Congo’s mining-driven economy has been crippled by the global economic downturn that has led to a fall in demand for mineral exports, its primary foreign currency earner. Income from mining and oil exports make up around 60 per cent of state revenues.
Benchmark world prices for copper, Congo’s primary mineral export, on the London Metal Exchange traded at around US$4 600 per ton on Friday, down from a record high of almost US$9 000 per ton last July.
In March, the IMF slashed Congo’s 2009 growth forecast to 2,7 per cent from an October projection of more than 10 per cent.
Direct foreign investment, primarily in the mining sector, was slashed by around two-thirds.
By February, Congo’s foreign reserves had all but evaporated.
Central bank interventions in the local currency market, backed by an IMF disbursement of around US$200 million in emergency funds, have in recent weeks helped stabilise the country’s sliding franc currency. -Nampa-Reuters