Congo raises rates, intervenes to support weak franc

Tue Jan 13, 2009 10:20am GMT
 

KINSHASA (Reuters) - Democratic Republic of Congo, facing a fall in demand for its exports, has raised key interest rates for a second time in three weeks and intervened in the market to support its franc currency, the government said.

The huge central African country, which has seen demand for its minerals, oil, timber and diamond exports slump over the past six months, has also launched a programme to rein in public spending, Communications Minister Lambert Mende Omalanga said.

It included raising the reserve requirement for banks to 7 percent of deposits from 5 percent, he said.

Omalanga, the government spokesman, told reporters in the capital Kinshasa late on Monday that the central bank had raised its benchmark director's rate to 55 percent from 40 percent.

That followed a previous increase in the rate from 28 percent which was ordered in December but announced publicly by the government last week.

The central bank spent $10 million intervening in the market on Monday to support the Congolese franc, Omalanga said.

Although that is a small figure in terms of world currency markets, it represents a significant chunk of Congo's foreign currency reserves, which stood at around $75 million in mid-December -- less than a third of their level last April.

The International Monetary Fund said last month that Congo's foreign currency reserves were at a five-year low.

The government said last week that it would accelerate efforts to secure a $200 million loan from the IMF's Exogenous Shock Facility to help cope with the effects of plunging exports and the scaling back of several large planned mining projects.   Continued...

<p>A street vendor counts cash in Kinshasa in a file photo. REUTERS/Finbar O'Reilly</p>

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