ECONOMY-D.R.CONGO: Starting out on a Long, Steep Road

By IPS Correspondents Reprint | | Print |

Kenneth Blackman

KINSHASA, May 15 1998 (IPS) - It would have seemed impossible at the time, but since seizing power a year ago, the government of the former Zaire has stabilised a national currency that used to lose value almost daily and has slashed inflation by at least a digit.

Now, the authorities of the country reborn on May 17, 1997 as the Democratic Republic of Congo (DRC) are preparing for the next major moments in a battle for economic development that will prove much more difficult than the seven-month war that swept President Laurent Kabila to power.

Come June 30, the franc congolais (FC-Congolese franc) will be introduced, although Congolese will have 12 months to switch to the new national currency, which will be equivalent to 100,000 New Zaires (NZ – the outgoing currency).

The changeover is to be accompanied by steps aimed at increasing the use of a neglected banking system, spurned even by the government which, like the majority of Congolese, conducts most of its business in cash.

For starters, taxes and other monies due to the state will be paid by cheque, according to Central Bank Governor Jean Claude Masungu Mulongo, while the banking sector will be restructured over a two-year period, during which insolvent banks will be closed down.

The general idea is to restore confidence in the banking sector, put some order into the economy and spur development in this Central African nation struggling to emerge from three decades of pillage and economic chaos.

The usual practice under late dictator Mobutu Sese Seko was to print money when necessary, which led to plunging exchange rates and soaring inflation. Kabila’s Alliance of Democratic Forces for the Liberation (AFDL) of Congo-Zaire has been credited with silencing the printing presses and thus stabilising the old NZ.

When the AFDL took over, the NZ exchanged at about 180,000 to the U.S. dollar. Within a short while, the rate had improved to 100,000:1 and, although it later declined, it remained stable for months. However, in recent weeks, it has dropped to 130,000 to the dollar and, paradoxically, this is because of the impending changeover to the Congolese franc.

“If the exchange rates have become a bit nervous these days, it’s because of the psychosis of fear,” Denis Lubindi Yongolo, publisher of ‘La Bourse’ — an economic weekly — told IPS. “People have begun to get rid of much of their New Zaires and stock up on hard currency, because they do not know what will happen.”

That’s a legacy of the Mobutu days, when monetary reforms meant uncertainty and great inconvenience, Lubindi adds. “They used to say that everyone had to exchange (their old currency) in one month,” he explains.

As a result, Zaireans sought refuge in the U.S. dollar, which still co-exists with the NZ on Kinshasa’s streets. Prices are quoted in both currencies and moneychangers can be seen waving wads of 100-dollar or 100,000-NZ notes at prospective clients.