Congo Finance Minister steps in to halt depreciation of Franc
The Democratic Republic of Congo’s government will reduce its cash expenditure and encourage tax payments in francs instead of US dollars in an effort to halt the decline of the nation’s currency, Finance Minister Nicolas Kazadi said.
The measures come after the Congolese franc lost more than 23% of its value against the dollar since the beginning of the year.
“These measures are of a nature that will reduce the demand for foreign currency and accentuate the demand for Congolese francs,” Kazadi said after meeting Monday with President Felix Tshisekedi and officials from the government, central bank and commercial lenders. “We’re going to be much stricter.”
Read more: Election Spending Pushes Congolese Franc to Record Low
Government spending on multiple conflicts in eastern Congo and elections scheduled for December, coupled with lower-than-expected revenues have put pressure on the franc, according to the International Monetary Fund. Recent central bank interventions including an interest-rate hike and increased franc reserve requirements for commercial banks have failed to stop the depreciation.
Kazadi said the strict enforcement of a limitation on cash transactions over $10,000 will curb a practice of making large government payments in cash through the central bank and flooding the market with francs that were quickly converted to dollars.
Earlier this month, the IMF said that the “sizable cash transactions” conducted by the central bank as a fiscal agent — about $1 billion worth in 2022 — were “concerning” and must be reduced to comply with Congolese law and global anti-money laundering recommendations.
As pre-election spending continues, the finance ministry will balance its dollar and franc payments to avoid destabilizing the currency market, Kazadi said.
So far, about $380 million out of $680 million budgeted for the elections has been disbursed, he said.
Structural changes like increasing the number of Congolese with bank accounts through mobile technology and facilitating payments in francs are key to strengthening the currency in the longterm, the minister said. The country also needs to expand its domestic industries from agriculture to insurance, so that more goods are produced in Congo and more money stays in the nation’s banks, he said.
“We, Congolese, need to learn to trust our money,” Kazadi said.
