World Bank Readies $5 billion for Congo, With Conditions

(Bloomberg) --

The World Bank could provide as much as $5 billion to Democratic Republic of Congo over the next five years if its new government commits to raising more revenue, fighting corruption and opening up its economy.

The financing would be a welcome boost for Congo’s new president, Felix Tshisekedi, who has promised a bold series of costly social programs, including free primary-school education for more than 20 million children. Last month, the International Monetary Fund said it’s considering resuming lending to the country after a seven-year hiatus.

The World Bank is offering to support parts of the government’s agenda, “but not at any price,” Jean-Christophe Carret, the World Bank country director for Congo, said in an Oct. 30 interview in Kinshasa, the capital. “We will help if they are credible in their will to reform a lot of things in the economy.”

Aid from the Washington-based lender will be conditioned on government commitments to increase revenue and improve management of everything from health and education to Congo’s burgeoning mining industry, Carret said. The World Bank is also pushing the government to reduce the number of tax exemptions it gives to various businesses, he said.

Congo is the world’s largest cobalt producer and Africa’s biggest miner of copper and tin. It’s also rich in deposits of gold, oil and other natural resources.

IMF Program

Despite its immense mineral wealth, Congo’s 81 million people are among the poorest in the world. The nation annually ranks near the bottom of the most difficult places to do business. Some of the World Bank’s demands will focus on liberalizing the economy, particularly in opening up the supply of water, electricity and internet coverage, Carret said.

“The private sector needs to want to invest,” he said. “That is the only condition under which we can bring the population out of poverty as quickly as possible.”

A new IMF loan program would also open the door to $1.5 billion of budget support from the World Bank over three years, Carret said. The IMF halted its last program with Congo in 2012 amid worries about corruption in the mining industry.

Any new financing for Congo must first be approved by the World Bank’s board of directors, which already agreed to a $500 million program to fight childhood malnutrition in May. The bank has about $1 billion left in its most recent program that ends June 30.

Part of that money is destined for Tshisekedi’s free primary-school initiative, which should cost about $1.1 billion per year, Carret said. The Bank will contribute about $400 million a year for three years if the government takes steps to make the program sustainable.

Rail Failure

“It’s a governance program for the education sector,” Carret said. Congo’s constitution guarantees free primary education, but mismanagement and the country’s tiny budget, with only about $5 billion in revenue, have never allowed it. One quarter of Congo’s population is primary-school age.

World Bank results have been mixed in Congo, which is still recovering from years of war.

Carret called a World Bank plan to fix the country’s bankrupt national rail system “a failure” after it spent $380 million through last year.

“We didn’t succeed because there was a lack of willingness to reform,” he said.

In 2016, the lender pulled $73 million in funding for Congo’s Inga III hydropower plant over worries about transparency.

Development of the $14 billion project has stalled, as the country has yet to find a way to finance feasibility studies. The World Bank has no more interest in Inga III, Carret said. It will instead focus any new funding on smaller energy projects that are quicker to launch, like micro-hydro plants and solar power, he said. Only about 10% of Congolese have access to power.

World Bank funding to Congo is half grant and half “highly concessional” loans.

The bank is also in talks with the government and United Nations to restart a demobilization program for armed groups throughout the country. The plan will focus on providing financial support to communities that reintegrate ex-combatants instead of giving the rebels money directly as previous programs have done, “and which was perceived as a kind of bonus,” Carret said.

©2019 Bloomberg L.P.

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