The Congolese money market is actually facing a
Local Currency (LCY)-CDF shortage and many commercial banks have to recourse to the
Central Bank for overnight borrowing. While the average overnight borrowing rate
stands around 15% p.a., the Central Bank borrowing rate varies from 29.5% for
the banks that can offer securities as guarantee to 48% p.a. for those with no securities!!! This increases significantly
the cost of funding for commercial banks that are historically USD liquid.
Strangely enough, the Congolese MPs have
apparently being paid in USD recently (to be verified). The payment of civil
servant constitutes an important source of local currency for the market. By paying
them in USD, this aggravates the LCY shortage. The resulting higher demand for
Congolese francs by commercial banks has pushed the USD down by 0.2% overnight against the
CDF.
In an economy largely dollarized, one may
wonder what the role of the local currency is if even public servants are paid
in foreign currency...
3 comments:
interessant
Good point you've got there. Now my question is, do the people in charge of Economy and Finance aware of this and just playing dumb, or there's more to it?
There is no easy answer to that issue my friend.
On the one hand you have a currency that NO ONE trust. Imagine the public/businesses reactions if the Government/Central Bank was announcing that the CDF will be the only legal currency on the Congolese soil (which would be normal for a sovereign country- we are probably one of the only countries in the world where you can exclusively withdraw foreign currency from an ATM). This will create a panic among all investors and we would probably see capital flying out of the country because no one is ready to exchange his precious dollars against Congolese francs…
On the other hand, as a sovereign country, you don’t want to abandon your currency and therefore monetary policy although the latter is totally impotent…
The only thing I can tell you is that last year it was not on the Central Bank agenda…
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