DR Congo has revived a long-standing dream of promoting the national currency and sidelining the dollar to regain control over key economic levers.
The Democratic Republic of Congo’s economy became informally ‘dollarised’ several decades ago under the dictatorship of Marshal Mobutu Sese Seko, whose chaotic rule bred four-digit inflation.
Today, the Congolese franc and the US dollar co-exist, but the greenback remains massively dominant.
The dollar is used in major contracts, business transactions and the bank accounts of the well-heeled, and even accepted by shopkeepers and in cash machines.
‘The US dollar is the common currency, just as English is the common language,’ said a vendor in ‘Le Chateau’, the nickname for a small street in Kinshasa’s business district studded with the umbrellas of money-changers.
The use of the dollar tamed hyperinflation, but also sapped the government’s room to shape fiscal policy and spending, which are the basic tools of economic management.
Foreign currencies are believed to account for more than 90 percent of the money supply in this sprawling country of more than 2.3 million square kilometres (888,000 square miles).
Now, the authorities are once again mulling how to boost the standing of the Congolese franc, although thinking is still at an early stage.
President Felix Tshisekedi has called on the government to carry out ‘deep reflection on making the Congolese franc a strong and stable currency’, according to minutes of a cabinet meeting on August 6.
Strengthening the franc would improve the public’s purchasing power and help to ‘accelerate the de-dollarisation process,’ the report said.
The way of achieving this would be through ‘a series of measures aimed at using the Congolese franc as the unit of account for all transactions,’ the report said.
Several attempts at ‘de-dollarisation’ have been made before.
Measures forced through at the end of the 1990s fell short because of a recession linked to war in the east of the country and a flourishing black market in foreign exchange.
Conflict in the east, pitting armed groups against each other and the army, persists to this day.
Another bid was launched in 2012, when the government had high hopes for growth and new high-denomination bills of Congolese francs. But that too failed.
Almost 10 years later, the government and the new head of the country’s central bank, Malangu Kabedi-Mbuyi — a former International Monetary Fund official (IMF) — are under orders to find a new solution.
Words of caution
No details have been released on how they plan to proceed, but advice and warnings are not lacking.
‘Talk of the de-dollarisation of national life… should not be a slogan or a roll-call of glib intentions,’ the daily Le Potentiel warned this week.
It urged the state ‘to preach by example, through its various services, from the bottom to the top.’
Economist Michel Nsomue said the government was hobbled by a fundamental problem.
‘The international financial institutions have been demanding a clampdown on inflation, and this has been used as the pretext to restrict issuance of the Congolese franc,’ he said
The result, he said, has been to open the gates to a ‘massive and disorderly’ influx of foreign currency.
Such priorities were wrong, he said.
In a country immensely rich in minerals of all kinds, but where more than two-thirds of the 80 million inhabitants live in poverty, ‘the fight against unemployment (and) the development of resources’ should take precedence over tackling rising prices, he said.
‘You don’t import development, you create it from within,’ said Nsomue.
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The government has been given some help with the latest inflation figures.
Monthly inflation at the end of July was 0.42 percent, against 2.95 percent a year earlier. And the Congolese currency has recently enjoyed a very relative stability, of around 2,000 francs to the dollar.
But many Congolese are sceptical. They have known too much hardship and disappointment to believe that the situation will change at the wave of some magic wand.
‘What rubbish!’ said the money changer in ‘Le Chateau.’