Download democratic republic of congo

DEMOCRATIC REPUBLIC OF CONGO
Political Background
The Belgian Congo gained independence from
Belgium in 1960 and was renamed Federal Republic
of Congo with Patrick Lumumba as the Prime
Minister. In 1965 Mobutu Sese Seko came to power
with the support of United States and changed the
name of the country to Zaire. He declared the
country a one party state and his 32 year rule brought
corruption on an unprecedented scale and the
economy collapsed. In 1996 rebel leader Laurent
Kabila led a coalition and inturn, the Tutsis formed a
militia and erupted in rebellion against Mobutu.
They were soon joined by various opposition groups
and supported by several countries, including
Rwanda and Uganda. This coalition became known
as the Alliance des Forces Démocratiques pour la
Libération du Congo-Zaïre (AFDL). They were
seeking the broader goal of ousting Mobutu. In May
1997, Mobutu fled the country, and Kabila marched
into Kinshasa, naming himself president and
renamed the country Democratic Republic of
Congo. In 1998 Congo returned to a state of civil
war as a series of rebellions by Jean-Pierre Bemba
backed by Uganda and Rwanda erupted against the
government. Angola, Zimbabwe and Namibia came
to support President Kabila. In 2001 President
Kabila was assassinated and his son Joseph Kabila
took over the presidency. The UN deployed a
peacekeeping force and a ceasefire plan became
reality in 2001 when a peace deal was signed between
DRC, Uganda and Rwanda which led to the
withdrawal of foreign troops. The conflict was
reignited in January 2002 by ethnic clashes in the
northeast and both Uganda and Rwanda then halted
their withdrawal and sent in more troops. Talks
between Kabila and the rebel leaders led to the
signing of a peace accord in which Kabila would
share power with former rebels. By June 2003 all
foreign armies except those of Rwanda had pulled
out of Congo. Much of the conflict was focused on
gaining control of substantial natural resources in
the country, including diamonds, copper, zinc, and
coltan. DR Congo had a transitional government
until the elections were held. A referendum was
approved by voters and on July 30, 2006 the Congo
held its first multi-party elections since
independence in 1960. After this Joseph Kabila got
45% of the votes and his opponent Jean-Pierre
Bemba got 20%.A rerun was held on October 29,
2006, which Kabila won with 70% of the total votes.
On December 6, 2006 the Transitional Government
came to an end as Joseph Kabila was sworn in as
President.
Economic and Social Analysis
Sparsely populated in relation to its area, DRC is
home to a vast potential of both human, natural
resources and mineral wealth in form of copper,
cobalt, diamonds, gold and zinc yet the economy of
the DRC has declined drastically since the mid1980s. Mining accounts to three quarters of export
revenues and 34% of the countries GDP while
agriculture accounts for 55% and services 34% in
2004. Poor infrastructure, an uncertain legal
framework, corruption, and lack of openness in
government economic policy and financial
operations remain a brake on investment and
growth. Agriculture is the mainstay of the economy,
accounting for 57.9% of GDP. Main cash crops
include coffee, palm oil, rubber, cotton, sugar, tea,
and cocoa. Food crops include cassava, plantains,
maize, groundnuts, and rice. In 1996, agriculture
employed 66% of the work force. Rich in minerals,
the DRC has a difficult history of predatory mineral
Last Updated February 2010
extraction, which has been at the heart of many
struggles within the country for many decades, but
particularly in the 1990s. The civil war claimed an
estimated three million lives, either as a direct result of
fighting or because of disease and malnutrition. It has
been called possibly the “worst emergency” to unfold in
Africa in recent decades. The DRC has the third largest
population and the second largest land area in SubSaharan Africa. The social situation remains fragile and
Table 1: Economic and Social Indicators
1
Population
64.7million (2008)
Spending on Health
4%GDP (2002)
2
Spending on Education
No data
1
Life Expectance
46years (2008)
1
Spending on Debt Service
4.3% exports (2008)
1
People with access to safe water 54% (2006)
3
GDP real Growth rate
5.7% (2008)
1
External debt
40.8 % GDP (2008)
People living on less than $1
No data
2
AFRODAD COUNTRY PROFILES - DRC
poverty is prevalent throughout the country. Life
expectancy stands at 43 years, under-5 mortality above
200 per thousand, and DRC's Human Development
Index declined by more than 10% in the last ten years; it
now ranks 167 out of 177 countries. Since 2001,
however, with support from the Bretton Woods
Institutions (WB/IMF), the government has launched
the implementation of economic, financial and
structural refor ms aimed at stabilizing the
macroeconomic situation and the creation of a climate
conductive to private sector-led development. It
managed to break the hyperinflation cycle and to
stabilize the exchange rate. From a rate of 511% in
2000, the inflation declined to 135% in 2001, and fell
further to 18% in 2006. In 2003, it decreased to 4.4 %.
Health expenditure per capita in 2001 was 3.5% of
GDP. The fragility of the state has allowed continued
conflict, internal displacements and human rights
abuses. In early 2001 the government of DRC
undertook the Enhanced Interim Program with a view
to breaking the vicious circle of budget deficits and
inflation. July 2003 the DRC becomes eligible for
external debt relief (decision point) under the Heavily
Indebted Poor Countries (HIPC) Initiative. The IMF
has supported the government's economic program
under the Poverty Reduction and Growth Facility
(PRGF) (June 2002-June 2005); financial support totals
SDR 580 million (approximately US$800 million);
semiannual reviews. DRC program under the PRGF
was based on the Interim Poverty Reduction Strategy
Paper (I-PRSP) dated May 2002 and the first progress
report dated June 2003.The DRC received external debt
relief under the HIPC Initiative, an initiative of the IMF
and World Bank. The DRC reached its "decision point"
in July 2003, making the country eligible for a reduction
in its external debt from US$13 billion at end-2001 to
approximately US$1.5 billion. This debt relief will
become permanent at the "completion point". In the
interim, the DRC is received HIPC debt service relief
(approximately US$76 million in 2004). Under the
HIPC Initiative, the resources freed up by the debt
relief are allocated for "pro-poor" spending.
2
Debt Analysis
DRC total debt stock best suits the category of
“odious” debt. Between 1965 and 1997 the late Mobutu
accumulated up to US$13 billion and DRC's debt in the
same time line went up to US$12billion due to
embezzlement and corruption by Mobutu's regime. In
1980 the country's debt service ratio was 22.6% of
exports. When Mobuto died in 1998, his personal
fortune was estimated in the region of US$5 billion.
None of this was used for economic development and
his stolen wealth together with capitalized interests on
the loans account for a substantial part of DRC's
current external debt burden. Two thirds of the long
term debt is owed to bilateral creditors, mainly the US
and France. A quarter of the long term debt is
multilateral, the largest part being owed to the World
Banks IDA. In the 1990's there have been no payments
to official creditors on long-term debt since 1994, and
total arrears reached US$8.2million. In 1998 the debt to
export ratio was 774%, which was very unsustainable
considering a 3% economic decline that year. The debt
per capita has been very high and in 2007 it was
US$196.00. The external debt represents a heavy
burden for the DRC's recovery prospects as it is one of
the world's most debt-laden countries, with an
estimated total stock of external debt of US$12 billion,
about 225% GDP and 1,280% exports. The total
external debt thus is absolving critical funds that should
be used for education and health among other service
delivery uses.
Table 2: Selected External Debt Indicators
Units
1980
1990
1995
2000
2004
2005
2006
2007
2008
Total External Debt
US$billion
4 770
10270
13239
12609
11814
11057
5250
5219
5115
Debt per capita
US$
177
275
274.6
235
188
180.5
190.8
196.2
790
Bilateral Debt
US$billion
2287
6193
6376
5220
7915
-
7774
3621
-
Multilateral Debt
US$billion
322
1929
2 382
2 179
3481
-
3427
1597
-
Private Debt
US$billion
1 462
889
878
264
426
0.0
0.0
0.0
0.0
Public Debt
US$billion
3308
9381
12361
12345
10745
11057
5250
5219
5115
1
4
3
3
1
1
4
External Debt/Exports %
198.6
397.6
747.9
2594
581
807
367
-
-
1
External Debt/GDP
%
34.4
119.8
271.5
180
120.5
107.3
107.1
102.1
80.4
Debt service Paid
US$million
543
348
25
806
163
154
252
370
291
Debt service/Exports
%
22.6
13.5
1.4
18.4
11.6
10.6
9.6
9.6
9.3
Grants
US$million
96
374
161
137
-
16.5
-
17.5
15.5
7,030
-
5268
4335
6561
7223
8824
10423
12541
1
2
2
2
GDP current market price US$million
Source:
1
African Statistical Yearbook 2009
African Development Bank Statistics 2009
Africa Economic Outlook 2006
4
AFRODAD Stuff estimates
HIPC country document, World bank/IMF staff estimates
World development indicators Database, April 2009
World economic Outlook, 2008, GDF online database (March 2009)
2
3
AFRODAD COUNTRY PROFILES - DRC
3