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DR Congo Perspectives on the Financial Crisis

Emilie Mushobekwa's picture

The main impact of the global financial crisis on the DRC economy is the slowdown in overall economic growth, which is projected to be 6 percent in 2009. With the crisis going on, the situation is likely to deteriorate. Two of the major sectors expected to drive DRC growth in 2009, i.e. infrastructure and mostly mining, have already been severely affected by the crisis.

The fall in global prices for key DRC commodity exports (including copper which declined by half within a few weeks) is at the foundation of the problem. As a result, a number of mining companies are scaling down activities until commodity markets stabilize. This also poses a great threat on employment. Most of the investment in infrastructure for the coming years is expected to be financed through the Chinese deal “Infrastructure against Mining”. Given the sharp decline in mineral prices, infrastructure investment at this scale can no longer be achieved or will have to be postponed. Export revenues will decline significantly due to lower commodity prices, and the current account surplus, sustained by booming commodity prices, is projected to turn into a deficit in 2009-10. International reserves are also expected to decrease significantly, and debt service payments are to be delayed. In the domestic financial system, there is risk of bank deposits and credits shrinking. Foreign aid is likely to be affected as well.

The financial crisis aside, DRC is facing a huge humanitarian and security crisis in the east brought on by armed conflict. These two crises are expected to have a considerable impact not only on the government’s fiscal position (lower revenue and higher security spending), but also on social sectors due to the mass movement of people. To address the crises issues the government is working to maintain macroeconomic stability and is in discussions with the donor community for emergency financial support and to agree on a PRGF which is expected to lead to HIPC completion point as soon as possible.

Comments

Submitted by Murenzi Ivan on
Good news is that, Rwanda and DRC have agreed to end the Insurgency in the Eastern part of DRC caused by the CNDP and FDLR (former Rwandan soldiers that participated in 1994 Genocide). I think that this is going to be a positive set economically, leading to improved economic activity in the region and reduced government spending on security.

Submitted by Bertran on
The crisis is likely to lead to a delay in implementation of national projects after reviewing their feasibility studies. Thus, the Government of DRC has limited ability to influence the negative changes in economic conditions caused by the crisis. Nevertheless, the crisis showed the need and an opportunity to make efforts in the construction of hydropower plants, the development of own agriculture to reduce dependence on imported foods, and stimulate savings.

In referring back to the problems of not developed countries relying on the sale of commodities and raw materials, which have low added value are still the basis of the productive chain. With the crisis becomes more evident that these countries should have a strong program of technological development, which will result in the long term, as the possibility of these countries can also sell products with higher added value and not just raw material. But the difficulties are great for this, I know. But in times of crisis it is evident that countries throughout the term walk the correct path, with investment in education, infrastructure and technology are the least suffering in times of crisis. Excellent post with great value!

Submitted by francis maduka on
Am thanking you for your excllent work in world bank,which include help Africas in there epulatic investment.But what is our hope on tecchnology? Thanks and have a niceday

It is so painful the way IMF, World Bank and Big International Donors are treating my nation, the DRCongo. Evryone knows how this country is suffering from social, economic and infrastructural concerned. Roads are completly down, now we are even having difficulties to drive to the University inside big city, nevertheless those who live in rural areas. While our Government trys to find solutions on how to resolve this problem, you white people who are living quietly like angels in your nations, you come down to impose the Government not to allow China to rebuilt our desastrous country.But America goes to China to borrow USD8bns to built nuclear powerplant, when it is the DRCongo who goes to China for USD6bn to rebuilt to all country it shocks everyone in Europe and Americas. You white people, God will judge you from what you are doing against poor Africans, and I beleive one day we will be stronger and we will revange against this treatment. It is my point of view and don't quote me wrong. I am really upset, but we are not killers otherwise it could push others people to join terrist groups because it is unacceptable what you are doing to us. You supported Mobutu while destroying the nation, now when we come together and say let us try to rebuilt our country you bring us all sort of stories, wars, sanctions, imposition, dictas and so on. What do you think you are? It is really upsetting, bcz when our children do not go to school but yours travel from our country to another spending thousand of pounds and dollars for tourism, you are so happy. The day will come...... If you want me, here is my phone nuber; 00243811692276. I am opened to defend my thoughts.

Submitted by Anonymous on
Well said!please send these thoughts to the Ted organization or maybe it's red I can't remember.it's a platform for opinions and yours obviously should be heard by a much wider and western audience .good health and peace be with you and keep trying on the Internet I hope you got many replies like mine

Submitted by Shalini Sinha on
Agreed there are huge reserves of natural wealth in major parts of Africa. Politics has lomg been intertwined with this. Is poverty reduction really a matter of discussion of small-scale concrete actions to enable a population to survive througout the medium term? We need to focus on basic needs here. I work for the brand new Ministry of social Integration and Economic Empowerment in Mauritius, and I have been devising ways and means to reduce poverty in Mauritius keeping local specificities in mind. We need a concerted effort backed by the main leader's support. We are already a year old and have achieved the foundations, the layers are coming. At first it was concertations and negotiations, then concrete actions. Everything is possible for the determined thinker and leader...need the right people to implement actions.

Submitted by Sarah on
The problem with DRC is that it is heavily dependent on mining, and base metals such as copper are highly dependent on world economic climate. Since 2008 at the writing of this article, copper prices have rebounded but remain fragile upon uncertainty in the economy of the major world economic power, the United States. It might be premature to say that we are going into a double dip worldwide recession, but the situation is indeed fragile and we need to be cautious. The DRC should, in my opinion, diversify its efforts in order to reduce exposure to one certain aspect of the economy. As the old saying goes, 'don't put all your eggs in one basket'. Best Wishes, Sarah from http://www.chainsawsforsale.biz

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