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IMF Urges Congo’s Central Bank to Stop Lending to Government

IMF Urges Congo’s Central Bank to Stop Lending to Government

(Bloomberg) --

The Democratic Republic of Congo should immediately stop borrowing from the central bank and repay debt owed to the institution, the International Monetary Fund said.

The loans, which come amid increased government spending and a “lackluster revenue performance,” have eroded the nation’s foreign reserves, the Washington-based lender said in a statement Tuesday. In December, the IMF board approved a credit injection of about $370 million to support the reserves, which it said were at “critically low levels.”

Africa’s largest producer of copper and the world’s largest producer of cobalt, Congo is negotiating its first loan with the IMF in almost eight years. A previous loan program was halted in 2012 because of concerns about corruption in the mining industry.

The government should control expenditures and find ways to increase revenue, Mauricio Villafuerte, the head of an IMF mission to the country, said in the statement.

Congo’s central bank said it agreed with the IMF.

Funding of the government’s deficit at the beginning of 2020 was a “problem of adjustment” as spending on free education and other programs continued to “surpass its ability to mobilize financing and raise revenue,” Jean-Louis Kayembe, director-general of the central bank, said by phone from Kinshasa, the capital.

Government bonds have not been sufficient to cover the budget deficit, so the bank has had to issue its own debt and sell foreign reserves, Kayembe said. That’s reduced the bank’s “room to maneuver” in the event of economic shocks, he said. Inflation remained contained at 4.6%.

Congo’s economic growth slowed to 4.4% in 2019 from 5.8% the previous year, mainly due to lower mining production, according to the IMF.

To contact the reporter on this story: Michael J. Kavanagh in Kinshasa at mkavanagh9@bloomberg.net

To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Vernon Wessels

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