The International Monetary Fund’s (IMF) executive board will consider the bailout plan for the Congo Republic on July 11, according to s report posted on the IMF website. The bailout has been in limbo since 2017. IMF has been asking the Congo Republic to put in place a plan for ensuring the sustainability of debt and how it would service the unduly large debt contracted over the years. The country owes most of its debt to China and oil traders. Congo Republic is an oil producing country and that way it has a good revenue stream. But most of its revenue is used for debt servicing. Fiscal profligacy is another reason for the heavy indebtedness of the country. As latest as May, an IMF team has visited Congo Republic and recommended the IMF board to approve a three-year credit facility after the government reached an agreement to restructure a portion of its debt to China. The lurking fear of the country is that IMF can reject the bailout proposal, further straining the resource position.
There is a background to such a fear. Negotiations for the bailout plan got dilatory, with the IMF’s executive board demanding the central African oil producer to ensure the sustainability of its debt, most of which it owed to China and oil traders. French financial advisers Lazard and more recently Parnasse, a firm employing former IMF Managing Director Dominique Stauss-Kahn, were hired by Congo to assist it in the negotiations with the Fund. The advice, purportedly, given by Kahn listed out high risks involved in getting the bailout and the impact on the economy in case the loan gets struck. The letter was reported to be signed by Strauss-Kahn and Matthieu Pigasse, head of Lazard France, which they refute.
IMF rejected the advisers’ position that the program, which would also likely to unlock financing from the World Bank and African Development Bank. Experts maintain that release of loans by these two organizations is dependent on the approval of bailout package by the IMF.
Undeniably, Congo’s economy is not in pink mainly due to a sharp drop in oil prices in 2014. Its debts increased to 118 percent of GDP in 2017, not an ideal situation for considering a bailout plan by IMF, which has to comply with certain criteria for sanctioning of loans. The foremost hurdle was the country’s heavy indebtedness to China and the least effort undertaken by Congo to restructure that loans. Now, it is reported that Congo reached an agreement to restructure a portion of its debt to China. It is not yet known the details of that agreement and when the restructuring process would start. Therefore, one has to keep the fingers crossed till a final decision is taken by the IMF for the bailout plan and the money is disbursed finally.
