2012 has been characterized by an
incredible stability of the consumer prices side. Indeed, as of December the 30th2012,
the inflation was standing at 5.67% from 16% in January (the index used by the
Central Bank to measure the inflation is based on Kinshasa figures only). As a
result, the central bank prime rate has gradually decreased since the beginning
of the year; from 25% in January to 4% p.a. in December.
During the last decade, the real
interest rates in the DRC were among the highest in the world (around 50% at
some points). Corporate banks have made a lot of money in the T-Bills market during
the same period. Some international banks have purchased Congolese T-Bills for
millions of USD during that period enjoying high yields offered locally. The
margin differential between the DRC and the rest of the world was so
significant that the country sovereign risk came second.
However, the game has changed
lately. The central bank has (finally) realized that the T-Bills are the only
financial instrument available to investors in Congolese Franc (CDF).
Therefore, they have regularly decreased their offer lately, leaving the
commercial banks competing on the rates. Today, the average rate on T-bills
stands at 0.20% against an inflation of 5.67%.
As shown on the graph below, the
real interest rates is close to -6% in December 2012 while it was approximately
+5% in March 2012. The de-dollarization of the economy discussed in my previous
article will probably help providing local investors with other instruments
such as facilities in CDF but at this point the margins will remain negative as
the BCC has noticed that those unattractive rates have had no negative impact
on the inflation or the currency…
Source: Central Bank of Congo
Although the performance regarding
the inflation in 2012 is remarkable, it is worth noting that the government
continues to freeze millions of dollars of payments in favor of local State
suppliers. Therefore, the results would have been different assuming all those
payments were made. We understand the necessity to control/review the contracts
agreed previously but if this country wants to be taken seriously, it will need,
sooner than later, to ensure continuity in State matters.
