How do you explain the instability of the Congolese Franc?
We have had some instability on the foreign exchange market for quite some time. You must go back a few years back in order to understand the current situation. We had an exchange regime, which was fixed, and it was changed to a floating exchange rate. This decision was announced on May 28th. Business anticipated on the floating exchange rate. The difference between the fixed rate and the free market rate was 50 against 265, when we started presenting how this new regime would work. And by the time we took the decision, the rate had moved to 360. So when we moved and devalued, we knew that the exchange rate at the beginning was not set by the fundamentals of the economy. There were mostly speculations, so we took the courqge to move to a floating exchange rate. For gasoline, prices were multiplied by four, and for transportation they increased by three.
We experienced a lot of turbulences in the last two months with exchange rates moving as high as 38% within a couple of days, sometimes up, then down and back up again. There's an adjustment period in which all business partners have to go through especially when there's a new way of conducting business namely operating under a floating exchange rate regime. We have tuned the mechanisms put in place to monitor and communicate information on the foreign exchange market. We don't have an exchange rate target. If we had, we should be able and willing to intervene on the market to stabilize the rate. Instead, we have an inflation target rate of 99 % coming from 511 % in the year 2000.
The government has launched new economic measures. As the Governor of Central Bank what chances are you giving to those measures to succeed?
First of all, this is not the first time that we undergo such an operation. We did that in 97 -98, before we launched the new currency, the Congolese Franc. In the past we had the Zaïre currency, and in those days we went from an inflation rate of 696 % in 1996 and brought it down to 14 % as of December 1997. In June 1998 that rate went down to 7% so we were managing from a budgetary point of view, we had sound finances. The Central Bank implemented a tight monetary policy. So for the second time we applied the same administrative medicine, by identifying the cause of the instability, which is the 3-digit hyperinflation. In May for example, we had an inflation rate of 36 %, in June we had inflation rate of 2.2 % and in July the rate was negative -10.7 %. This is called deflation. Prices started to come down, which is good. However, we must take into account the interests of those who export, those who import, and the consumers. We need to get the right ratio. I think that if we continue on that trend, we have high chances of being successful.
How do you perceive the independence of the Central Bank?
The government is in charge of the fiscal part and we are in charge of the monetary parts. So whatever needs to be done on the Monetary Front, we advise the government: this is what needs to be done, those are the chances of success. For example, moving from a fixed exchanged rate to a floating exchange environment requires the autonomy of the Central Bank, in order to put in place the right mechanism. The Central Bank had to convince the members of government that was the right policy to follow. We are happy that they followed us and we are obtaining positive results.
| In the past weeks, you met with World Bank officials among others. What feedback have you received from them?
The feedback is encouraging. They tell us to continue with the same discipline - obviously because the results are positive. We hope that because of the very good results we obtained in the first or second months of the program, they will be in a better position to come and help Congo much faster than anticipated, not just with congratulations but also with something concrete meaning money!
What amount of loans do you expect to get by the end of the year?
We don't expect loans but there are some investment projects by various partners over a six months period from June to December.
What about the World Bank?
It is not just the World Bank; you also have the European Union. The World Bank is 50 millions USD in grant. But in total the emergency plan was 115 millions USD. We have received pledges for 240 millions USD.
What message would you address to those investors looking at Congo as an investment destination?
My message is that all these things come into stages. The first thing is to analyse the economic fundamentals. We must reassure the investors that they can earn from their investment, and repatriate their profits. In our exchange regulation, investors can repatriate investments and profits. The Central Bank just requires a declaration for statistical purposes. Last week, we passed a law creating arbitrage courts. These courts will help in settling disputes much faster. This is important for investors, in case of a conflict. We have recently published a new investment code, in conjunction with a new mining code. Because when we think of Congo we think also of diamond, gold, copper, cobalt and so on.
Will there be a "One stop shop" before the end of the year ?
We hope so because what we have noticed is that there are a lot of red tapes in our administration. There must be one institution where all the authorizations could be delivered
What will be your final message to our readers?
Our primary market is Europe. Europe is very important to us and it will become even more important in the future. This is the time for investors to position themselves in Congo. We have everything to build for a successful. We hope to have in the future positive growth rates as high as 8 % to 10 %.
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