The BCC
T-bills have been one of the most lucrative financial tools over the last 5-6
years with a real yield well above the ones in other monetary zones. While
placements in EUR and USD was generating a 0.5 to 2% yield (in nominal terms),
the BCC T-Bills interest rates (in real terms) have been above 20% p.a. for a
long time.
However, the
T-Bills interest rates have decreased to a meagre 3% p.a. on the 11th
of April from 16.3% a month earlier (both rates in nominal terms)!
There are
two main factors explaining this decrease. First, the Central Bank has
decreased its prime rate to 17% which has a direct impact on interest rates.
The second and most important factor is the volume of T-bills sold by the
Central Bank. In a one month period the BCC has reduced its offer by more than
CDF 65 million increasing the competition among the commercial banks. As a
result, to get a piece of the cake some banks have bid as low as 3%.
Central
Bank T-bills are the only financial instruments available for investors who are
looking to invest in the DRC local currency. There are two possible consequences
from this drop. The first one (my favourite) is nothing will happen as
investors have no other choice whatsoever. The second choice (my colleagues favourite)
is that people will start selling their Congolese Francs (CDF) to buy USD and
invest somewhere else leading to a depreciation of the local currency. The reality
is that most people keep CDF for only one reason, which is to pay taxes. Their
excess CDF liquidity is only kept because they are waiting for a good
opportunity to buy some dollars...
As a result, I argue that the only impact
will be a dramatic drop in commercial banks interests’ revenues...
