Central bank urges restraint as DRC’s metal output jumps
Inflation is expected to hit 48% in 2017 in the Southern African state
Dakar — Copper production in the Democratic Republic of Congo (DRC), Africa’s top producer of the metal, rose 9.3% in the first nine months of 2017, but soaring inflation remained a risk to the economy, the central bank warned on Monday.
Rising mining production should help ease some of the economic problems in the DRC, where inflation is expected to hit 48% in 2017 and the Congolese franc has fallen 22% against the dollar, largely due to lingering effects from two years of low commodity prices.
Copper production in the first nine months stood at 831,000 tonnes, the central bank said in a monthly report, while cobalt production increased 18% to 59,000 tonnes and gold production rose 5.7% to 23,000kg.
But the bank warned that any let-up by authorities on tight monetary policy and austerity measures, which have reduced fiscal deficits in recent months, could cause inflation and currency depreciation to spiral again. It said the annual inflation rate could rise to as high as 76% by the end of 2017 if those policies were relaxed. The franc could fall further, by as much as 39%, if the policies were not maintained, the bank said.
The DRC’s mining sector, which along with the smaller oil sector accounts for 95% of export revenue, has grown steadily since the end of the civil war in 2003, attracting investors such as Glencore and Randgold Resources.
The DRC’s economy has also been rattled by political upheaval caused by repeated delays since 2016 to an election to replace President Joseph Kabila. The electoral commission postponed the vote again on Sunday to December 2018.
Government spending traditionally increases near the end of the year.
"Based only on the historic inflationist behaviour of the final quarter [of the year] due to the year-end festivities, it is unlikely that the current rigour will be maintained without creating social discontent," the bank said.
The DRC forecasts economic growth of 3.2% in 2017, up from 2.4% in 2016 as the commodity sector continues to recover.