An attempt to help the Congolese currency keep afloat with the injection of $150 million into circulation has not helped matters.
The Congolese francs has continued to nosedive in strength against convertible currencies including the US dollar.
According to a survey of the foreign exchange market, the injection appears to have been an insufficient effort to reverse the trend.
Observers say the value of Democratic Republic of Congo’s currency continues to slide as security and pre-election spending, coupled with lower-than-expected revenues, put pressure on the exchange rate with the dollar.
The Congolese franc has lost more than 20% of its value against the US currency since the beginning of the year, dropping from about 2,000 francs to more than 2,400 a few weeks ago.
Recent central bank interventions including an interest rate hike and increased franc reserve requirements for commercial banks have failed to stop the depreciation. On the streets of Kinshasa, some money changers offered 2,550 francs per dollar.
Congo’s economy grew 8.9% last year, according to the International Monetary Fund. The Washington DC-based lender forecasts a strong 6.8% increase in 2023, buoyed by expansion in mining, particularly copper.
But the government’s revenue projections look to be overly optimistic, according to the IMF.
“The government’s revenue shortfalls and rapid spending contributed to a deterioration of the external balance, excess domestic currency liquidity, exchange rate depreciation, and persistent inflation,” the IMF said in a review of its loan program with Congo published last week.
Spending in the lead-up to elections scheduled for December and government expenditures on a series of violent conflicts in eastern Congo, as well as speculation by money changers are all contributing to the franc’s slide, experts state.
Congo’s poorest, who use the franc for small purchases, bear the brunt of the depreciation. As the franc’s value falls the cost of food staples is rising. Prices for food and fuel are already higher due to widespread inflation around the globe. Consumer prices rose 21% in the twelve months through June 24 in Congo, according to the central bank website.
Malangu Kabedi Mbuyi, the central bank governor, urged Congo’s council of ministers on Friday to work with the bank to coordinate monetary and budget policies to reduce the exchange rate and inflationary pressures.
Kabedi Mbuyi also reminded currency traders of recent central bank rules prohibiting the publication of the exchange rate in public along the street, in an attempt to ward off an erosion of confidence in the franc.
ADDITIONAL REPORTING: Bloomberg
