Congo to downsize Chinese deal in debt relief bid

By Joe Bavier

The Democratic Republic of Congo announced

on Tuesday it would downsize a controversial

infrastructure-for-minerals deal with China,

winning IMF assurances it could be

in line for swift debt relief.

The International Monetary Fund feared

the contract to use Congo's mineral reserves

as a guarantee for infrastructure projects

could plunge the African nation deeper

into debt and had delayed forgiveness

of most of the $10 billion Congo owes.

The changes will narrow to $6 billion

from $9 billion the value of the deal with China,

which has overtaken the United States

as Africa's top trading partner.

"During our visit the authorities ... told us

that the partners have accepted

the amendments in the project of

the Sino-Congolese agreement

including the removal of

the government's guarantee on

the mining project," IMF mission chief

for Congo Brian Ames told

reporters after talks in Kinshasa.

Congo central bank governor

Jean-Claude Masangu told the same

news briefing it would suspend

a $3 billion infrastructure phase

of the project that also raised IMF concerns.

"When the IMF services confirm that

the revised agreement is compatible

with the viability of the debt,

the Congolese authorities will be

in measure to solicit financial assurances

for (a new IMF) program from

the lenders of the Paris Club," said Ames.

"The administrative council of the IMF

will then rapidly be able to examine

the request for a new three-year

HIPC (Heavily Indebted Poor Countries)

program," he added of a plan

launched in 1996 to help

poor countries with their debt burden.

"Today, we have swept away all

the problems that the Chinese

contract could pose," said Masangu.

ON THE BACK-BURNER

The IMF did not detail the extent
of possible debt relief.

A figure of $7 billion worth of
non-commercial loans has previously
been mooted, which would save
Congo around $400 million in annual payments.

The IMF had previously cited the

two amendments as critical to ensuring

the deal would not add

to Congo's debt burden.

The contract with China is a cornerstone

of Congo's post-conflict reconstruction

policy following decades of dictatorship

and a 1998-2003 war that left

the former Belgian colony's infrastructure in ruins.

The deal was to have included two phases

of infrastructure projects with a total

price tag of $6 billion aimed at

rehabilitating thousands of kilometers

of road and rail connections and

constructing schools and hospitals.

"The second phase of infrastructure f

or three billion, we've put on

the back-burner," said Masangu. "

So with this three billion gone,

we are now talking about six billion."

In addition to the first phase of

infrastructure projects that will remain,

$3 billion is earmarked to develop

new Chinese copper and

cobalt mines in mineral-rich Katanga province.

"Concerning the mining project,

there was a guarantee from the state.

The Chinese partners are no longer

demanding a guarantee from the state.

We are left with an purely

commercial contract," said Masangu.

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             J-L K.
Procurement Consultant
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