IMF worried over China's $5 bln loan to Congo
(Writes through with details)
By Joe Bavier
KINSHASA, Oct 3 (Reuters) - The International Monetary Fund warned Congo on Wednesday to beware of the macroeconomic effects of a planned $5 billion loan from China to modernise the vast African country's decrepit infrastructure and mining industry.
President Joseph Kabila's government announced plans last month for the huge loan from China, which would be paid back partly in mining concessions and tolls from road and railways.
"We must beware of the macroeconomic impacts of such a project," IMF country representative Xavier Maret told a news conference in Democratic Republic of Congo's capital Kinshasa.
"We are not talking about a small amount: we're talking about a very large amount which will have not insignificant macroeconomic impacts on imports, exports, and I would say even on the exchange rate ... (and) in budgetary terms."
Maret said he had raised these concerns, which were shared by the international community, with the Congolese authorities who had assured him that the agreement with China did not jeopardize its association with other development partners.
Mineral-rich Congo is struggling to overcome a devastating 1998-2003 war and decades of mismanagement under former dictator Mobutu Sese Seko that have left much of the country in ruins.
Few roads exist outside Kinshasa and other major cities. The colonial railways remain a lifeline for much of Congo, despite wrecked infrastructure and daily, often deadly, derailments.
After his election last year as Congo's first democratically chosen leader in more than four decades, President Joseph Kabila announced an ambitious programme to rebuild infrastructure and revitalise the economy. The proposed Chinese deal would bolster two priority areas -- the transportation and mining sectors.
"The IMF is not opposed to the search for new financing to accomplish a poverty-reduction strategy, but the conditions under which that's to be done, and the macroeconomic impacts are very important to us," Maret said.
MACROECONOMIC PROGRESS
Maret said he was encouraged by the economic progress and fiscal responsibility shown since a new post-election government took office in February. He said Congo was on track to meet the annual objectives of its IMF-monitored programme.
Inflation was projected to fall to 9 percent at the end of 2007, in line with a target to cut inflation to single figures from over 21 percent in 2005, he said.
Economic growth was expected to quicken to 6 percent in 2007 from 5 percent the previous year, but will fall short of the 6.5 percent the IMF had initially hoped for.
"The explanation is that the good performance of the mining sector is tempered in part by a slowdown in manufacturing and construction, which are affected by cement shortages and electricity distribution problems," he said.
In recent months, mining companies have announced a slew of investment in Congo's revitalised mineral sector. Katanga Mining (KAT.TO: Quote, Profile, Research, Stock Buzz) said on Tuesday it expected to complete the final, $150-million tranche of financing for its $425 million Congo operation this week, just one of several massive projects in the mineral-rich southeast.
The African Development Bank (AfDB) said on Wednesday it had lent $100 million to the Tenke Fungurume copper mining project, its first private sector venture in Congo.
Foreign exchange reserves have grown from just $114 million in February to $207 million by the end of September. After paying off foreign debt, Congo hopes to maintain a reserve of $175 million at year's end.
By Joe Bavier
KINSHASA, Oct 3 (Reuters) - The International Monetary Fund warned Congo on Wednesday to beware of the macroeconomic effects of a planned $5 billion loan from China to modernise the vast African country's decrepit infrastructure and mining industry.
President Joseph Kabila's government announced plans last month for the huge loan from China, which would be paid back partly in mining concessions and tolls from road and railways.
"We must beware of the macroeconomic impacts of such a project," IMF country representative Xavier Maret told a news conference in Democratic Republic of Congo's capital Kinshasa.
"We are not talking about a small amount: we're talking about a very large amount which will have not insignificant macroeconomic impacts on imports, exports, and I would say even on the exchange rate ... (and) in budgetary terms."
Maret said he had raised these concerns, which were shared by the international community, with the Congolese authorities who had assured him that the agreement with China did not jeopardize its association with other development partners.
Mineral-rich Congo is struggling to overcome a devastating 1998-2003 war and decades of mismanagement under former dictator Mobutu Sese Seko that have left much of the country in ruins.
Few roads exist outside Kinshasa and other major cities. The colonial railways remain a lifeline for much of Congo, despite wrecked infrastructure and daily, often deadly, derailments.
After his election last year as Congo's first democratically chosen leader in more than four decades, President Joseph Kabila announced an ambitious programme to rebuild infrastructure and revitalise the economy. The proposed Chinese deal would bolster two priority areas -- the transportation and mining sectors.
"The IMF is not opposed to the search for new financing to accomplish a poverty-reduction strategy, but the conditions under which that's to be done, and the macroeconomic impacts are very important to us," Maret said.
MACROECONOMIC PROGRESS
Maret said he was encouraged by the economic progress and fiscal responsibility shown since a new post-election government took office in February. He said Congo was on track to meet the annual objectives of its IMF-monitored programme.
Inflation was projected to fall to 9 percent at the end of 2007, in line with a target to cut inflation to single figures from over 21 percent in 2005, he said.
Economic growth was expected to quicken to 6 percent in 2007 from 5 percent the previous year, but will fall short of the 6.5 percent the IMF had initially hoped for.
"The explanation is that the good performance of the mining sector is tempered in part by a slowdown in manufacturing and construction, which are affected by cement shortages and electricity distribution problems," he said.
In recent months, mining companies have announced a slew of investment in Congo's revitalised mineral sector. Katanga Mining (KAT.TO: Quote, Profile, Research, Stock Buzz) said on Tuesday it expected to complete the final, $150-million tranche of financing for its $425 million Congo operation this week, just one of several massive projects in the mineral-rich southeast.
The African Development Bank (AfDB) said on Wednesday it had lent $100 million to the Tenke Fungurume copper mining project, its first private sector venture in Congo.
Foreign exchange reserves have grown from just $114 million in February to $207 million by the end of September. After paying off foreign debt, Congo hopes to maintain a reserve of $175 million at year's end.
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