Democratic Republic of Congo central bank cuts interest rate

PUBLISHED: Fri, 18 Jun 2021 08:48:03 GMT
Bate Felix
Reuters
Share

KINSHASA, June 17 (Reuters) – Democratic Republic of Congo’s central bank on Thursday cut its main interest rate for the third time since the start of the year, to 8.5% from 10.5%, saying it expected a period of macroeconomic stability.

The rate cut follows a 500 basis points cut in April, and a cut to 15.5% from 18.5% in March as the economy stabilised from the initial effects of the pandemic. The bank had hiked the rate to 18.5% from 7.5% last August to tame inflation.

Economic growth in Congo, Africa’s top copper producer and the world’s leading miner of cobalt, is forecast to rise to 4.9% this year, up from an earlier projection of 3.2% and growth of 1.7% in 2020, the central bank said in a statement.

Inflation is expected to fall to 4.87% by the end of December, down from 8.69% in May, it said.

The pandemic badly dented public finances, with inflation peaking at 15.7% year-on-year in August 2020 and the Congolese franc depreciating sharply.

But the outlook has brightened in recent months, and the International Monetary Fund announced last month it intended to extend $1.5 billion in credit over the next three years.

Foreign exchange reserves increased by $453.9 million to $1.24 billion, or more than five weeks of imports, their highest level since 2015.

Sign Up for Our Newsletter Daily Update

Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent.
Get this delivered to your inbox, and more info about about our products and services. By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.

“This increase is explained both by the strategy put in place by the central bank aimed at maximizing interbank purchases of currencies and by the decrease in their consumption by the treasury,” the statement said.

(Reporting by Bate Felix; Editing by Alison Williams and Chris Reese)