Monday, July 18, 2011

Weekly update: Forex and Inflation


Following the CDF shortage described in my previous article, the USD has continued to lose value (-0.7%) against the local currency. According to Ali Nasser, trader in an international bank operating in Kinshasa, the commercial banks had to purchase CDF from the Central Bank in order to find the necessary Congolese francs to pay their customers taxes.

As stated in my last article, the Congolese economy is highly dollarized and the principal reason companies keep/seek CDF is to pay taxes which cannot be paid in foreign currency. Commercial banks unable to sell USD to the Central Bank to pay for these taxes because of their exchange position (square or too short) had to borrow money (from the same Central Bank between 32.5 and 48%).












Source: Banque Centrale du Congo

On the inflation side, the Consumer Price Index has increased by 0.27% in a week leading to a year-on-year inflation of 18.68%. If this trend remains stable until the end of the year, the annual inflation rate should reach 26.43%. 

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