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Debt Crisis: Congo (Causes of the Debt Crisis (3 Basic Methods (use tax…
Debt Crisis: Congo
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Scale of the Debt Crisis
Congo has been in a debt crisis, meaning it has not been able to repay its creditors since at least 2015 on the terms and timeline negotiated. Public debt in the country peaked at 119% of GDP in 2016, The debt-to-GDP ratio compares a country's sovereign debt to its total economic output for the year.
At the end of 2014, 60 percent of the debt was owed to multilateral creditors and 4 percent to official bilateral creditors. In 2014, the debt share due to creditors increased slightly from 33 percent in 2013 to 36 percent.
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Approximately 20 percent of African government's external debt is owed to China, says the Jubilee Debt Campaign, an organization that is fighting to cancel the debt of developing countries.
Most Chinese-African loans go into infrastructure projects like highways, railways and ports. In 2015, 17 African countries with risky exposure to China's debt were listed by John Hopkins University, possibly unable to repay their loans. Figures for the Republic of Congo are uncertain, with CARI estimating debts to China at about $7bn.
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The DRC exhibits the trappings of fragility: political instability, weak institutional capacity, and poor governance. The sheer size of the country creates its own challenges. It is as large as Western Europe. Most of its nine bordering countries have faced violent conflict with spillover effects to DRC. The country has experienced episodes of violent conflict since independence in 1960 and full-scale civil war from 1997 to 2001. Since the end of the civil war, efforts have been made to rebuild the state and transition to democracy, but public management and institutions remain weak and vulnerable. The ongoing violent conflicts have led to a humanitarian crisis with over five million displaced people and widespread violence against civilians.
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Poverty is widespread. Social indicators show an unusually high population growth rate of around 3.27% a year. DRC ranked 178th out of 185 countries on the 2016 UNDP Human Development Index. Fiscal capacity is weak. Domestic revenue is low even by sub-Saharan African (SSA) standards. Institutional capacity is limited with a CPIA (Country Policy and Institutional Assessment) score of 2.7 (a score below 3.2 represents low performance).
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