* Congo to issue longer-term, 3-month T-bills from April
* Central Bank cuts reserve requirements for franc deposits
* Government seeking to wean economy off dollar reliance
By Peter Jones
KINSHASA, March 19 Democratic Republic of Congo
will begin issuing longer debt maturities from April and slash
reserve requirements for local currency deposits as it seeks to
wean its economy off the U.S. dollar, a senior central bank
official said on Wednesday.
Willy Mwana, director of studies and analysis at the central
bank, said Congo would start to issue three-month Treasury bills
from April 2 as part of a strategy to promote use of the
Congolese franc and develop local financial markets.
Congo currently issues seven- and 28-day Treasury bills.
Mwana said that around 80 percent of current issuance was
one-month bills, suggesting there was strong demand from
Congolese banks for longer maturities.
"The new bonds are a sign that we believe in Congo's
macroeconomic stability which allows us to move towards bonds
with a longer maturity," Mwana told Reuters. "The first offering
will be on April 2."
Years of turmoil in the former Belgian colony made the U.S.
dollar the default currency for banking and economic
transactions but the government is pushing through a raft of
measures to promote the franc on the back of increasing
stability, in a bid to regain control over monetary policy.
The domestic currency has all but halted its depreciation
against the dollar and inflation last year was just 1.1 percent.
A meeting of the central bank's monetary policy committee on
Tuesday left the benchmark interest rate at 2 percent.
"Inflation is already very weak. The low interest rate will
encourage investment and provide credit to the economy at a
reasonable rate," Mwana said.
The central bank forecasts inflation will climb to 3.7
percent this year, driven by strong economic growth and
The government says Congo's roughly $20 billion economy is
on track to expand by 9.5 percent in 2014, up from 8.5 percent
growth in 2013.
That is one of the strongest growth rates in Africa, driven
by a boom in the mining sector, which accounts for nearly a
third of output. Congo produced a record 942,000 tonnes of
copper in 2013 - ranking it as the continent's largest producer
according to commodities analysts CRU Group.
SECONDARY DEBT MARKET
Congo is also rich in deposits of gold, diamonds,
cassiterite and coltan but their development has been hindered
by corruption, mismanagement and decades of war.
The vast majority of its 65 million population live in
poverty, despite the country's mineral wealth. With the
government having pacified the main rebel group in eastern
Congo, policymakers hope Congo may be emerging from the
turbulent decades since its independence in 1960.
"We are thinking about the creation of a financial market,
so we need more titles of a longer maturity to create a
secondary market," said Mwana. "Those who have three-month bonds
will have to negotiate that bond on the market."
The central bank slashed the level of long-term, domestic
currency depositions that banks must hold in reserves to 3
percent from 7 percent. For checking accounts, it lowered the
level by 1 percentage point to 7 percent.
Reserves for foreign currency deposits remain unchanged at 8
percent for fixed and checking account deposits, Mwana said.
"This will free up liquidity and increase available credit,"
said Mwana. "It will encourage borrowing in Congolese francs."
(Editing by Susan Fenton)