ECONOMY
Sparsely populated in relation to its area, the Democratic Republic of the Congo is home to a vast potential of natural resources and mineral wealth. Nevertheless, the D.R.C. is one of the poorest countries in the world, with per capita annual income of about $300 in 2007. This is the result of years of mismanagement, corruption, and war.
In 2001, the Government of the D.R.C. under Joseph Kabila undertook a series of economic reforms aimed at stabilizing the macroeconomic situation and promoting economic growth. Reforms were monitored by the IMF and included liberalization of petroleum prices and exchange rates and adoption of disciplined fiscal and monetary policies. The reform program reduced inflation from over 500% per year in 2000 to only about 7% per year in 2003. Inflation rose to 15-20% percent in 2006.
In June 2002, the World Bank and IMF approved new credits for the D.R.C. for the first time in over a decade. Bilateral donors, whose assistance has been almost entirely dedicated to humanitarian interventions in recent years, also are beginning to fund development projects in the D.R.C. In October 2003, the World Bank launched a multi-sector plan for development and reconstruction.
In July 2003, the D.R.C. became eligible for external debt relief ("decision point") under the Heavily Indebted Poor Countries (HIPC) Initiative. However, the D.R.C. lost its eligibility for interim debt relief when it failed to make its sixth IMF review in 2006 due to fiscal slippages and slow implementation of key structural reforms. If the D.R.C. successfully completes its current non-disbursing staff-monitored program with the IMF and qualifies for a new IMF disbursement program, it will be back on track for HIPC debt relief. This debt relief will help alleviate the D.R.C.'s external sovereign debt burden and provide critically needed resources for poverty reduction programs.
In early 2008, the D.R.C. concluded an agreement with a consortium of Chinese companies to create a joint venture to exploit mining resources and develop Congolese infrastructure. The project will be financed by a $9 billion loan arranged by the consortium. To ensure debt sustainability, some of the loan agreement's provisions must be clarified in order to qualify the D.R.C. for a new IMF Poverty Reduction and Growth Facility (PRGF) program.
The D.R.C. Government is working to implement the Poverty Reduction Strategy Paper (PRSP) approved in mid-2006 by the IMF and World Bank boards. The government's five-year program, approved by the National Assembly in February 2007, is based on the PRSP and focuses heavily on President Kabila's five priority areas: infrastructure, employment, education, water/electricity, and health.
Agriculture is the mainstay of the Congolese economy, accounting for 45.7% of GDP in 2006. The main cash crops include coffee, palm oil, rubber, cotton, sugar, tea, and cocoa. Food crops include cassava, plantains, maize, groundnuts, and rice. Industry, especially the mining sector, is underdeveloped relative to its potential in the D.R.C. In 2006, industry accounted for only 27.7% of GDP, with 6.5% attributed to manufacturing. Services reached 26.6% of GDP. The D.R.C. was the world's fourth-largest producer of industrial diamonds during the 1980s, and diamonds continue to dominate exports, accounting for over half of exports ($642 million) in 2003. The D.R.C.'s main copper and cobalt interests are dominated by Gecamines, the state-owned mining giant. Gecamines production has been severely affected by corruption, civil unrest, world market trends, and failure to reinvest.
For decades, corruption and misguided policy have created a dual economy in the D.R.C. Individuals and businesses in the formal sector operated with high costs under arbitrarily enforced laws. As a consequence, the informal sector now dominates the economy. In 2002, with the population of the D.R.C. estimated at 56 million, only 230,000 Congolese working in private enterprise in the formal sector were enrolled in the social security system.
In recent years, the Congolese Government approved a new investment code and a new mining code and designed a new commercial court. The goal of these initiatives was to attract investment by promising fair and transparent treatment to private business. In 2007, shortly after the Joseph Kabila administration took office, the government launched a wholesale review of mining contracts that had been entered into under previous governments. In theory, the purpose of this contract review was to determine which negotiations may have been colored by corruption and revisit/renegotiate their terms as need be. In practice, this process has itself been opaque, with little information provided by the government to foreign (including American) investors.
The World Bank also is supporting efforts to restructure the D.R.C.'s large parastatal sector, including Gecamines, and to rehabilitate the D.R.C.'s neglected infrastructure, including the Inga Dam hydroelectric system.
The outbreak of war in the early days of August 1998 caused a major decline in economic activity. As was noted above, the country was divided de facto into different territories, and commerce among these territories had halted. With the installation of the transitional government in July 2003, the country was reunified, and economic and commercial links began to reconnect. Economic growth resumed in 2002 with a 3% growth rate, continuing in 2007 at 7%.
In June 2000, the United Nations established a Panel of Experts on the Illegal Exploitation of Congolese Resources to examine links between the wars and natural resource exploitation. Reports issued by the panel indicate that countries involved in the war in Congo developed significant economic interests in the D.R.C. that complicated Congolese Government efforts to control its resources and the mining sector. Although the original Panel of Experts was disbanded when its mandate ended in late 2003, a separate UN Group of Experts continues to look into these issues due to the apparent links between the illegal armed groups in the eastern part of the D.R.C. and natural resource exploitation. The Group of Experts is scheduled to issue a final report on these issues by the end of 2008.
GDP (2007): $9.85 billion.
Annual GDP growth rate (2007): 7%.
Per capita GDP (2007): $300.
Natural resources: Copper, cobalt, diamonds, gold, other minerals; petroleum; wood; hydroelectric potential.
Agriculture: Cash crops--coffee, rubber, palm oil, cotton, cocoa, sugar, tea. Food crops--manioc, corn, legumes, plantains, peanuts.
Land use: Agriculture 3%; pasture 7%; forest/woodland 77%; other 13%.
Industry: Types--processed and unprocessed minerals; consumer products, including textiles, plastics, footwear, cigarettes, metal products; processed foods and beverages, cement, timber.
Currency: Congolese franc (FC).
Trade: Exports (2006)--$1.587 billion. Products--diamonds, cobalt, copper, coffee, petroleum. Partners--EU, Japan, South Africa, U.S., China. Imports (2006)--$2.263 billion. Products--consumer goods (food, textiles), capital equipment, refined petroleum products. Partners--EU, China, South Africa, U.S.
Total external debt (2006): $11 billion.
