[ 2013-04-07 ]

DR Congo looks to end reign of US dollar
KINSHASA (AFP) - With the economy on the mend, the
government of the Democratic Republic of Congo has
begun a campaign to rebuild the national currency
and wean the country off the US dollar.

In the 1990s, during the waning days of the brutal
regime of dictator Mobuto Sese Seko,
hyperinflation that hit 2,000 percent led to the
marginalisation of the Congolese franc and the
rise of the safehaven greenback.

By the end of last year, the dollar accounted for
89 percent of bank deposits and 95 percent of
loans, according the country's central bank.

Since that spate of hyperinflation, the dollar has
been the currency for savings and major
transactions, with the Congolese franc relegated
to small retail transactions which are conducted
in increasingly worn wads of 500 franc (around
$0.50) notes.

Since July, the Congo Central Bank has introduced
new denominations of 1,000, 5,000, 10,000 and
20,000 francs.

But these, along with existing franc notes of
lower denominations, have been poorly received and
small retail businesses shun them.

However, Bruno Degoy, head of the local unit of
the Bank of Africa, which operates in a dozen
African countries, said he believes new bills
"should appear little by little" in circulation.

With inflation down to 2.7 percent and the dollar
exchange rate fixed at around 920 francs by the
central bank, "everything is in place" to ensure
the gradual wider use of the national currency, he
said.

The economic situation is also favourable, growth
came in at 7.2 percent last year and is forecast
to hit 8.3 percent this year, according to the
government.

Foreign exchange reserves are also more plentiful,
with the central bank now holding more two months
worth compared to just two days in 2009.

But the Congolese authorities are careful not to
push the process.

When the chief of the central bank, Jean-Claude
Masangu, launched the de-dollarisation effort in a
speech last year, he was careful to reassure
Congolese.

"There will be no forced conversion" of
currencies, he promised.

In an interview with AFP, Masangu said the process
of de-dollarisation could last up to a decade.

"Only once we've established confidence throughout
the system, will we shut the valves so all
payments are in the national currency," he said.

So far the government has only taken small steps
encourage the use of the franc.

Shops must publish prices in francs. And tax bills
are now sent out in francs, even though they are
usually still paid in dollars.

Budget Minister Daniel Mukoko Samba, when
announcing the de-dollarisation effort, noted that
Congo is following in the footsteps of a number of
other African countries such as Angola, Ghana,
Mozambique.

Zambia, Samba noted, chose to force the use of the
national currency.

In Congo the "the fiscal and monetary authorities
have chosen to let market forces work," he said.

But businesses are wary.

"This de-dollarisation doesn't have any up side
for us," said an importer of generators into the
country for two decades who asked his name not be
used.

"For the moment, the Congolese franc is incredibly
stable, but we remember times when prices were
changing every 10 minutes," he noted.

"The problem isn't the abandoning of the dollar,
it's the convertibility of the" franc if it
becomes the dominant currency for transactions.

Franck Meriau, head of the Franco-Congolese
Chamber of Commerce, said the there would be
practical advantages to having a single currency
in circulation, but only so long as "it remains
stable with the dollar" and "that importers can
obtain dollars without difficulty."

Bank of Africa's Degoy said "people have to get
used to using the national currency and the banks
participate in the process."

He warned that "if you go too fast, you will
destabilise the banks and businesses which have
loans in dollars."

He forecast that within a decade half of financial
transactions in Congo could be made in francs.

Indeed it may take time to wean Congolese from
dollars, given the way they treat them.

Dollar bills must always be in impeccable
condition, with creased or worn bills often
refused during transactions or only accepted at a
discount.

Meanwhile francs circulate with stains or torn at
the edges. Congolese, no strangers to conflict, in
dark humour jokingly call such "amputated" bills
"war casualties".

Source - AFP

... go Back