By Paul Ndiho
July 9, 2010
The International Monetary Fund (IMF) and the World Bank recently approved an estimated $8 billion dollars in debt relief for the Democratic Republic of Congo, the largest such write-off by the two bodies under programs launched in 1996 to ease the debt burdens of the world’s poorest countries.
The debt relief for Congo came without the backing from Canada and Switzerland, which both cited governance concerns in the country. Congolese President Joseph Kabila had pushed for the $8 billion debt cancellation before Congo celebrated its 50th anniversary of its independence from Belgium. Mr. Kabila argues that his country has put its painful past behind it following a 1998-2003 war in which some five million people died. Mwangi Kimenyi, Senior Fellow, at the Brookings Institution, says that the timing of this debt relief for Congo could not have come at a better time.
“Countries like Congo have had major problems because of the conflict, as we know–the ongoing conflict, although there has been some improvement. And it’s very difficult for those types of countries to actually make major debt progress with what we call a ‘debt of hung’ problem. So this type of relief is crucial for them to be able to move ahead.”
Kimenyi argues that for countries to qualify for debt relief, they must demonstrate improvements in their government and institutions.
“When countries make improvements in institutions there comes a point when they can reverse back. And what you can do is support them so that they do not reverse. So they may not have fully reached where you would like in terms of institutional development, but you also don’t want them to revert back to a poorer governance, to conflict, and so on.”
The World Bank-IMF deal will save Congo over $12 billion in debt service costs. The mineral-rich, Central African country is still plagued by a violent conflict with rebels in the east, despite a 2003 peace deal and the general elections of 2006. Canada and Switzerland’s last-ditch efforts to slow the debt relief process did not sway other World Bank member countries, which felt that Kinshasa had met all of the key benchmarks required under the debt relief program.
“DRC met all the criteria and the reforms needed to reach this completion point. The debt of DRC was about 13.7 billion dollars at end 2009 and after this completion point and debt cancellation that will be 2.9 billion.”
News of the debt relief came at a high point in celebrations marking Congo’s 50th anniversary of independence from Belgium. Last week, the World Bank also approved $50 million dollars in grants to help Congo improve governance in its mining sector. Analysts say Congo’s growth in Gross Domestic Product is expected to reach 5 percent this year.