For the second time in less than a decade, the Republic of Congo is on the verge of bankruptcy.
This is despite the fact that Congo-Brazzaville possesses
huge reserves of oil and is expected to become the third largest oil producer
in sub-Saharan Africa by 2018.
So how could oil-rich Congo get itself into such dire economic straits twice in quick succession? Much of the answer lies in Congo’s corrupt and mismanaged oil sector. In particular, debt has sky-rocketed due to a series of convoluted financial arrangements called oil pre-financing deals involving the Congolese national oil company, La Société Nationale des Pétroles du Congo (SNPC), and some of its top officials.
Despite a track record of corruption in Congo, in 2010 the International Monetary Fund (IMF) announced a debt relief package worth nearly US$2 billion to bail out the small central African nation, led by President Denis Sassou Nguesso for over three decades. But fast-forward to 2017 and the Congolese government does not appear to have made any progress: it is once again in negotiations with the IMF for another massive debt write-off.
The IMF’s 2010 bailout and subsequent debt relief from multilateral and bilateral agreements successfully reduced Congo’s external national debt by over 70 percent. Soon after, however, a familiar combination of corruption, mismanagement and greed by a handful of political elites saw debt figures more than triple in the space of seven years. As of July 2017 Congo owed $US9.14 billion - almost as much as the $US9.2 billion of debt the country had accumulated by the end of 2004.
Oil is the lifeblood of the Congolese economy. Depending on the year, income from oil represents as much as 75 percent of state revenues. Over the past decades, however, SNPC has managed to turn Congo’s oil resources into a mountain of debt by mortgaging its reserves of ‘black gold’ for years to come, depriving the people of Congo of income that should be invested into public services such as schools, roads and hospitals. Instead, parts of that income were diverted to the private pockets of some members of the Presidential clan. Their greed is one of the reasons why the Congolese economy is again on the verge of collapse.
The IMF is considering bailing out Congo again despite the country’s history of corruption and broken governance promises. It is vital that any new loan accorded by the IMF to Congo comes with strict transparency and accountability criteria attached, particularly related to oil sector management, and that any breach of these criteria leads to real consequences for the Congolese officials responsible.
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