First of all, I would like to wish you a Merry Christmas and a happy new
year 2013.
Today we have had our last meeting of the year with the Central Bank of
Congo (BCC). The topic was: the country de-dollarization process. For those of
you unaware of the project, the BCC has started a process few months ago to
ensure the Congolese Franc (CDF) finally plays its roles (payment, saving,
investments tools…). Indeed , today, the
Congolese economy is highly dollarized and the local currency is replaced by
the USD in almost all transactions; banks balance sheets are 90% in USD, bank
loans are granted in USD, ATM distribute USD notes, shopping is done in USD (
and sometimes even in EUR). Therefore, the CDF is seen as a sub-category of the
USD. One of the only reason people maintain CDF is to be able to pay taxes;
although some taxes can also be paid in USD.
The monetary authorities’ objective is to inverse this trend by 2017. A
committee including members of the BCC, the government and the Congolese
banking association has been appointed to work on the matter. A very detailed
timeframe has been put in place to reach this objective (headlines can be
provided on demand).
As always the key word here is 'trust'. There is a reason why Congolese
has turned to the USD at the first place. The lack of trust in the local
currency and in the ability of the country authorities to maintain its
purchasing power are the main reasons the demand for CDF remains marginal.
Duchene and Goujon (2006) argue
that the following conditions have to be fulfilled to successfully implement an
economy de-dollarization:
·
Price and currency
stability
·
Strong growth
·
Significant Forex reserves
·
…
The track record observed over the last 5 years is positive when it
comes to those factors.
However, the authors insist that the biggest risk is the political changes.
I am not a political expert but I am pretty sure the political stability will
be the main stumbling block toward the authorities’ objective…
Recently, the BCC has successfully introduced CDF notes of 1 000, 5 000,
10 000 and 20 000 without fuelling the inflation as feared by many. This is one
of the many steps toward the above objective. The success of this operation was
based on the people trust toward the Congolese authorities and I have to admit
it was a success. However, this was a small operation compared to the magnitude
of the de-dollarization
I argue that this process was long overdue and I am glad the
government/BCC have decided to work on this issue. The method will be key (the
BCC has already pledged that no one will be forced to convert its foreign
currencies in CDF) as well as the trust in the authorities to achieve this goal…
Rendez-vous en 2017…
