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Hidden debts contribute to crisis in Congo

  • Questions still to be answered about scale of hidden debts and who loans were from
  • Congo and Chad both cannot repay, but negotiations complicated by loans backed by oil

The IMF has reported that the Republic of Congo’s debt is higher than previously thought, but has not shown by how much or who the hidden debt is owed to. The Fund and Congo are in discussion on a bailout and austerity programme.

In a March 2017 press release the IMF said the Congo’s government debt was 77% of GDP, though the institution’s actual review from the time has not been released. However, in September the IMF said there were hidden debts, and in October it reported that the debt is actually 110% of GDP ($9.1 billion). However, not enough information has been released by the IMF to know how much this increase in debt is due to falling GDP, more loans, or previously undisclosed debt.

Congo has been drastically hit by oil price falls, with government revenue falling from $6.3 billion in 2013 to $2.5 billion in 2016. Some of the debt is thought to be owed to commodity trading companies, who lent money to the government guaranteed by future oil revenues. Therefore, if Congo defaults on these debts, the companies will be able to claim this oil money, further decimating the government’s revenue.

The M'Boundi oil field in the Republic of Congo, owned by Italian multinational company ENI (Flickr / jbdodane, January 2014)

The M’Boundi oil field in the Republic of Congo, owned by Italian multinational company ENI (Flickr / jbdodane, January 2014)

In October 2017, Congo said it required a debt restructuring, though depending on how payments have been guaranteed by oil, it may be difficult to get some creditors to negotiate if they feel confident of being able to claim the oil anyway. Of the Congo’s $9 billion debt, only $478 million is owed as bonds, and these do not have a huge repayment burden as interest is 2.5% ($12 million) and the bonds do not mature until 2029.

Congo qualified for debt relief through the Heavily Indebted Poor Countries initiative in 2010. However, the government is still being sued in France by Congo-based construction company Commisimpex for $1 billion on debts dating back to before 1992. This debt claim is not included in the IMF’s $9.1 billion figure.

Chad similarly has debts guaranteed by oil, from loans from commodity trader Glencore, first given in 2013. In 2015, the debts were restructured to extend their maturity over 6 years rather than 4, but in such a way that the total payments over the 6 years (and net present value of the debt) actually increased.

Chad has gone into arrears on some of its payments to multilateral and bilateral creditors. In June 2017 the IMF agreed a $312 million loan programme with Chad over 3 years. This requires the external debt to commercial creditors, primarily Glencore, to be restructured, though the IMF has not indicated by how much.

Without any debt restructuring Chad’s external government debt payments are expected to average 36.7% of government revenue between 2017 and 2020. Chad is currently assessed as in debt distress by the IMF. For Chad to move to at moderate risk of debt distress would require debt payments to fall below 18% of government revenue, just over a 50% cut.


Countries

Chad, Congo, Republic Of
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Jubilee Debt Campaign's registered charity number is 1055675