The much discussed IMF Bailout Plan for Republic of Congo has been finally approved by the International Monetary Fund’s (IMF) executive board, on July 11th. The bailout plan of nearly $449 million for OPEC member Congo Republic may become a precedent for similar countriesstruggling under the weight of large debts to China. Subsequent to the drastic fall in crude prices in 2014, Congo’s economy suffered a massive set back, with soaring debt levels upto 118% of GDP by 2017.By March 2019,Congo’s debt to china touched nearly 1.48 trillion CFA francs ($2.56 billion). Congo’s negotiations for a bailout from IMF dragged on for two years as the Fund demanded that Congo should ensure the long-term sustainability of its debt as a precondition for a three-year extended credit facility programs. IMF wanted that the agreement should be accompanied by continued good-faith efforts to restructure commercial debt. To meet the IMF criteria, and to qualify for the support, Congo government undertook a series of reforms to improve transparency in the management of public resources, particularly in oil sector.
Republic of Congo concluded an agreement to restructure a portion of its Chinese debt in April 2019,Under the restructuring deal, repayment of 944 billion CFA francs will be extended by an additional 15 years. However, Congo, must pay off a third of that amount by the end of 2021. China refused to reduce the amount of principal owed, a process known as taking a haircut. Many observers view Congo as a test case for the IMF. Several countries from the continent, facing unsustainable debt due to commercial borrowing, a boom in Eurobond issues and heavy borrowing from China may approach the IMF for similar support in the coming years. But natural resource transparency advocacy group Global Witness has accused that details of oil-backed loan agreements and major infrastructure contracts remained largely hidden.
