The World Bank has approved debt relief for the Democratic Republic of Congo without the backing from Canada and Switzerland, who cited governance concerns in the Central African country.
The $8 billion debt relief deal is the largest granted by the World Bank and the International Monetary Fund under global programs launched in 1996 to ease the heavy debt burdens of the world’s poorest countries. Canada blocked the debt relief deal on Tuesday when it requested a delay in the World Bank meeting due to a dispute involving Vancouver-based First Quantum Minerals and the Congo’s government over mining rights, officials said.
Canadian officials said they were concerned with governance and rule of law in the Congo, and what it meant for the debt relief program. The International Monetary Fund approved the deal on Wednesday, reassured that it had strong commitments from Congo to tackle corruption and improve transparency in the mining and oil sectors. Approval by both institutions is needed.
Lambert Mende, Congo’s minister of information, said Canada’s actions were disruptive but there were no hard feelings. “Canada did something that disrupted our efforts as it took a lot for us to meet the debt relief conditions, but we have no problem with them and we will follow our relations with them as usual,” Mende told Reuters in Kinshasa.
Investors in Congo’s lucrative minerals sector were unnerved by the government’s move last September to close First Quantum’s Kingamyambo Musonoi Tailing copper and cobalt project. The company is seeking international arbitration. Last month, Congo’s Supreme Court also annulled First Quantum’s rights on two other mining titles.
The debt accord was meant to be a high-point of celebrations on Wednesday in Congo to mark the country’s 50th anniversary of its independence. With the debt relief, President Joseph Kabila had hoped to show the world his country had moved beyond its painful past after a 1998-2003 war in which an estimated 5 million people died.
Congo Minister of Finance Matata Ponyo said the debt relief would significantly reduce the country’s debt service payments, freeing up resources to rebuild the country and reduce poverty. “We will put it into sectors that will help the reconstruction of the country — health and social affairs,” Ponyo told Reuters. Congo pays about $300 million a year in debt services, he added.
Negotiations with remaining creditors, including other commercial and non-Paris Club bilateral creditors, are expected to start by October.
The Paris Club of creditor nations, which were owed $7.368 billion at the end of 2009 by Congo, may later in the year decide to wipe out up to 100 percent of their debt. Congo’s largest bilateral lender outside the Paris Club is United Arab Emirates, with $171 million.
Jean-Louis Kayembe wa Kayembe, director general at the central bank and head of the monetary policy committee, said debt reduction could affect growth. “Although there’s no direct line to economic growth, debt reduction may increase our growth rates because it means we can now attract and make more investment,” he told Reuters, without elaborating. Congo’s gross domestic product growth is expected to reach 5 percent in 2010.