Tshinu Consulting CEO on the effectiveness of Congo’s central bank rate hike

The Central Bank of the Democratic Republic of Congo made a bold move in August this year by more than doubling its key interest rates from 7.5% to 18.5%. The decision aimed to cushion the depreciation of the local currency and keep inflation in check amidst the challenging economic landscape. In light of this development, Michelle Losenbe, CEO of Tshinu Consulting, shared insights on the impact of the rate hike and the broader economic outlook of the country. Losenbe highlighted the significant economic struggles facing the DRC, emphasizing the need for substantial growth to meet the population's basic needs and reduce poverty. The country's economy, valued at $30 billion, faces immense challenges exacerbated by the impacts of COVID-19. Despite the economic hurdles, Losenbe noted that the mining sector, a vital component of the economy, has remained resilient during the pandemic, with copper production even increasing. However, challenges persisted in other sectors, including reduced private sector investments and government funding constraints. The government's ambitious budget plans to revive the economy faced execution challenges, reflecting the broader economic difficulties faced by the nation. The Central Bank's decision to raise interest rates was a response to inflationary pressures resulting from low foreign currency reserves and exchange rate volatility. While the adjustment aimed to address the immediate economic challenges, Losenbe emphasized that the economy's dollarized nature limited the impact of the rate hike on overall market dynamics. Looking ahead, Losenbe predicted that interest rates may continue to rise in response to ongoing economic pressures, particularly on foreign currency reserves. In the face of multiple crises, including Ebola and COVID-19, the DRC has demonstrated resilience and adaptability. However, Losenbe cautioned against complacency and emphasized the need for proactive measures to strengthen the country's ability to navigate future challenges. Drawing lessons from past crises, the country must collaborate across sectors and with international partners to build a robust response strategy for future uncertainties. Losenbe urged stakeholders to work collectively to enhance the DRC's resilience and ensure sustainable economic growth in the face of global uncertainties.