Published on Africa Can End Poverty

DR Congo Perspectives on the Financial Crisis

This page in:

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.

Join the Conversation

The content of this field is kept private and will not be shown publicly
Remaining characters: 1000