Congo Brazzaville: towards an economic take-off

In January 2010, after several failures, the country has finally acceded to the Heavily Indebted Poor Countries Initiative (HIPC) with the cancellation of much of its debt by the Bretton Woods institution, which apparently was regarded as an obstacle to the economic development efforts undertaken. The relief granted by the World Bank has reduced by half the multilateral debt, passing from 434 644 440 US Dollars in 2004 to 210 668 679 US Dollars, and the Paris Club creditors has totally cancelled all the Congolese debt. That was a big breath of fresh air for the Congolese finances, whose external debt was over 50% of country’s GDP.

But should we wonder whether the country has so far met or at least began its economic takeoff? For that, we should consider the country’s macroeconomic stability, which is less structured and less diversified, therefore concluding to an unbalanced Congolese economy. It is based primarily on oil, with 13.5 million tons of barrels per year, accounting for the period 2005-2008, representing an   average 66% of GDP, 93% of export incomes and 84% of government revenue. So the oil has become the main wealth of the country. In 2009, the surplus in trade balance, compared to 2008, has felt affected by exports of petroleum products and wood decline, but also by the explosion of import of consumer goods and investment. The financial and banking system does not yet meet the demand for credit, although major efforts of restructuring and privatisation have been committed. Investment, which is about 1,5 billion US dollars, remains generally limited,  the credit to the economy is weak and  the inflation is still present. Similarly, the private sector is facing enormous difficulties to grow and the unemployment rate remains high – 40% among the 15-19 and 40% to 20% in the group under 30. The business climate is not very favourable and the Doing Business report has ranked the country at the 179th place out of 183. But with the accession to the HIPC initiative, the country can now focus on diversifying, in near term, its economy and improving its external conditions. All these measures will support macroeconomic stability, unless the government falls more in the lax management of public funds as in many African countries, especially those whose main wealth is oil, where the economic growth is due to the inflow of oil revenues. The Congo reached an economic growth of 12% due to the resources generated by oil, in 2010, but the inflation rate is around 3%. The state budget has been recording surpluses since 2005, and public external debt now represents less than 20% of GDP and the payments’ balance is positive. It is therefore imperative to amend the regulations and the country’s institutions in order to promote an endogenous development. For example, to create a new business, the country is ranked 166 on 183, and for the foreign trade, the Congo is ranked 178/183. Many things have to be done, and those realised have to be consolidated…