Several creditor banks in Congo Brazzaville, led by BGFI Bank, have accepted a mechanism to reinject up to CFAF 300 billion into the economy. A relief as the state, in debt, is struggling to play its supporting role.
After the Paris Club, the London Club, the “Brazzaville Club” is emerging. In this case, it is about a group of creditor banks of the Congo, which had formed in the spring an economic interest group.
This club has just mobilized 300 billion CFA francs (457.4 million euros) in favor of Congolese companies. For a country particularly indebted and heavily affected by the effects of the current crisis, this financial support is a breath of fresh air.
In the search for solutions aimed at clearing the domestic debt, the government concluded, last March, a financing agreement with this Club of Brazzaville. Which brings together the BGFI-Bank, the Congolaise de Banque (LCB), Ecobank and the Sino Congolese Bank for Africa (BSCA). This claim relates to both commercial and social debt.
The announcement of new developments was made by Henri-Claude Oyima, CEO of BGFIBank Group, lead manager. The leader of the first banking group in Central Africa, reported on his mission, Saturday, September 19, to the President of Congo, Denis Sassou-Nguessso. “We are happy to announce that we have concluded, both with all the creditors of this club and the ministry in charge of finance and the budget, in favor of an envelope of three hundred billion CFA francs”, declared the banker.
This financing should “make it possible to settle part of the internal debt of Congo”, explained the CEO of BGFI Bank. Be careful, he warned, “this is not funding granted directly to the state, but funding intended to support businesses and allow the country’s economy to revive.” Which is weakened by the pandemic crisis and the sharp drop in the price of oil, the main export product.
Quick help!
In Congo-Brazzaville, for the period 2014-2016 alone, the state owes its suppliers, under domestic debt, a little more than these three hundred billion CFA francs. Without having initiated a movement to diversify its economy, the country’s finances are at their lowest.
The government is struggling to pay civil servants ‘salaries, retirees’ pensions and student grants. And the IMF is suspending aid because of the insufficient number of reforms and poor governance.
For Congolese companies, this announcement from the Brazzaville Club can therefore be of great help. Even if it takes more for some to get out of deficit and chronic need for payment.
Prime Minister Clément Mouamba estimated that in total, more than CFAF 250 billion will be injected into the economy. The discount relating to the cost of implementing the support, by the various partners. The creditors of the Brazzaville Club, thus reimbursed as a priority, are therefore intended to support the country’s real economy. The Prime Minister considers that the state, banks and companies “will find their way” in this operation, the first of its kind in Congo.
For his part, the Minister for the Budget, Ludovic Ngatsé, clarified that the Prime Minister had instructed the departments concerned to collect all the files within the next ten days in order to initiate the payment. As a first step, the state will have to clear the commercial debt owed to companies, in order to revive the economy. As a second step, the minister said, the government will tackle the social debt, that due to social security funds as well as that of other social debts.
In terms of its external debt, after suffering several setbacks from international financial institutions, the Congo obtained a moratorium on its debt, which represents more than 110% of GDP. The country is still awaiting the payment of the second tranche under the Extended Credit Fund (ECF), in accordance with the agreement signed with the IMF.
In fact, as part of its economic program concluded in July 2019 with the IMF, the Congo is required to pay off the domestic debt in order to promote the revival of private sector activities. Request reiterated in the face of the effects of the Covid-19 pandemic.
