WASHINGTON (Reuters) - The International Monetary Fund on Friday approved a long-awaited $550 million loan arrangement for the Democratic Republic of Congo, making the country eligible for an IMF debt relief program.
The debt relief, which will cut the DRC’s overall stock of public and publicly-guaranteed debt, will be reduced to about $4 billion from $13 billion, a senior IMF official said.
At Friday’s dollar-SDR exchange rate, the loan is worth about $551.45 million.
The IMF-backed economic program aims to generate economic growth, reduce inflation to single digits, strengthen public financial management and accelerate reforms in the DRC, which is emerging from a 1998-2003 war, the Fund said.
The loan was approved after the IMF pressured the DRC to renegotiate an infrastructure-for-minerals agreement with China, which the Fund argued would have increased Congo’s debt burden.
The size of the deal was cut in August to $6 billion from an original plan of $9 billion, and Congolese government guarantees connected with the commercial mining aspect of the agreement were taken off the table.
The Fund delayed approval of the loan and the debt relief pending a revision of the China deal.
IMF mission chief to DRC, Brian Ames, said without debt relief the country “is not sustainable from a fiscal or from a debt perspective, China notwithstanding.”
“You need debt relief to bring DRC into a debt sustainable position,” he told a conference call.
Ames said the IMF was closely monitoring large mining and infrastructure projects negotiated by Congo to ensure they did not compromise the country’s ability to service its debt.
He acknowledged the IMF was aware of recent discussions between India and DRC on a range of projects to rebuild and expand Congo’s broken infrastructure.
“In the same vein as we are concerned about China, we are concerned about any large, significant external debt that the government undertakes contractually or guarantees,” Ames added.
He said the IMF and other agencies, such as the World Bank, would scrutinize the terms and conditions of investment projects to ensure they are consistent with fiscal and debt sustainability.
The DRC’s debt relief program includes financing assurances and debt relief from the 19-member Paris Club of creditor nations, including Canada which initially raised concerns about a Congolese government review of mining contracts and its repercussions for Canadian mining companies.
For the Canadians, the concerns arose from a dispute between Congo and Canadian miner First Quantum, which is seeking international arbitration to resolve a dispute over a government decision to cancel a copper and cobalt project.