The central bank in Kinshasa has restored credibility and transparency to the nation’s banking sector.

In 2001, Joseph Kabila took on an economy crippled by massive treasury deficits and hyperinflation: a result of the unstable socio-political climate and continued armed conflict in the DRC over the previous ten years. The national currency, the Congolese franc (CDF), was depreciating rapidly and poverty was endemic. But much progress has been made in a relatively short time. The President’s first measure was to allow the free circulation of foreign currencies. His second was to move from a fixed and overvalued exchange rate to a free and floating exchange regime.

“The first program we put in place went so well that the International Monetary Fund (IMF) and the World Bank decided to assist us,” says André-Philippe Futa, former Minister of Finance, recently replaced by Marco Banguli. “We managed to stabilize the macroeconomic framework, particularly inflation which fell from 500 percent in 2000 to less than 10 percent in 2004. The exchange rate was stabilized for a long time at around CDF240 to the dollar.”

Inflation continued to fall sharply from 135 percent at the end of 2001 to 16 percent only a year later. In June 2002, the Kabila government agreed to a three-year poverty reduction and growth facility (PRGF) with the IMF. This program has provided around $850 million in assistance to the government to support macroeconomic stabilization, economic growth and poverty reduction.

“We managed to stabilize inflation up to December 2004. Recent turbulences are partly due to some unforeseeable military expenditure needed to deal with insurgents in the east,” says Mr. Futa, but also some excessive Congolese franc injection into the country’s economy had a direct effect on the currency rate.” The current transitional government has since adopted budgetary restrictions under IMF pressure to deal with this problem.

The main macroeconomic targets are to raise average annual real GDP growth, keep annual inflation down, and to increase foreign reserves. In 2002, for the first time in 13 years, economic growth was positive.

“The rate of growth went up from 3.5 percent in 2002, to 5.7 percent in 2003 and 6.8 percent in 2004. This is higher than the demographic rate, which is 3 percent,” says Jean-Claude Masangu, Governor of the central bank. Estimates put GDP at 6.5 percent for 2005. Still, this rate has to be put into perspective, since the economy is starting from scratch. “We hope to have a growth rate of more than ten percent within ten years, which I think we can achieve with the support of international patrons and donor institutions,” says Mr. Masangu.

JEAN-CLAUDE MASANGU Governor of the Central Bank of Congo

The authority of the central bank, vital for economic growth, has been established thanks to continuous auditing over the past five years and a drive to restore discipline, backed by a July 2004 law against money-laundering and the financing of terrorism.

As far as international institutions are concerned, the government has made important progress on certain crucial criteria. “The transition government has laid the foundations for growth. We have provided new codes for forestry, mining and investment. We have reorganized our entire fiscal system, including customs and administration, and prepared the ground for economic investors and the private sector,” says Mr. Futa.