Zaire swallows economic reforms

Zaire's colorful but controversial President Mobutu Sese Seko starts a new seven-year term of office Dec. 5 as a remarkable economic improvement is taking place in this poor, but potentially rich country.

Mobutu, a powerful personality symbolized by his swirling tribal swagger stick, has during the past 19 years imposed a large measure of peace and unity on this vast and rebellious state the size of Texas and Alaska combined.

Ruler of a strategically located, mineral-rich country, Mobutu is perceived as one of the West's main allies in black Africa and has several times been saved from disaster.

Moroccan and French troops were flown in to crush rebellions in the Shaba copper mining region in 1977 and 1978. In exchange, Zairian troops were sent to help the French in Chad and Zaire was the only African country to follow Morocco when it walked out of the recent Organization of African Unity summit in Addis Ababa after the Polisario was admitted.

But Mobutu's repressive rule has often shocked Westerners, who also criticized massive corruption and economic mismanagement in his country.

Despite his political success, Mobutu has so far failed to bring prosperity to a country brimming with copper, cobalt, diamonds, and other minerals as well as abundant farming potential. Per-capita income is only $190, among the lowest in Africa. In real terms it is less than one-third the level in 1960 when independence was gained from Belgium.

The country's transport infrastructure, notably the road and rail networks, has deteriorated to such an extent that many areas are practically cut off from the capital, Kinshasa. Less than one-third of the country's 90,000-mile road network is now usable year-round.

In many rural communities and small towns missionaries provide health care and schooling because government services have virtually collapsed.

For many years buoyant world copper and cobalt markets, combined with a willingness by Western governments and international bankers to lend vast sums to Zaire, allowed corruption and mismanagement to flourish unchecked.

By 1983, however, after nearly a decade of depressed copper prices and little sign of major recovery, heavily indebted, and after several broken International Monetary Fund (IMF) agreements, Zaire finally ran out of credit.

''Mobutu has no option - this time he had to swallow the IMF medicine,'' a Western banker in Kinshasa remarked.

Both bankers and businessmen have been impressed by the disciplined way in which Prime Minister Kengo Wa Dondo has implemented a series of Draconian economic reforms.

The most striking was a 80-percent devaluation of the zaire in September 1983 from six to 30 zaires against the dollar. This was followed by the introduction of a floating exchange rate fixed on the local interbank market. Foreign exchange is now readily available from local banks, and foreign firms are now able to remit profits abroad. Among the main beneficiaries are airlines, which over the years have accumulated vast sums in blocked accounts.

One of the major consequences of the monetary reforms has been the virtual disappearance of the black market. A far greater share of trade now passes through official channels, thus increasing government revenue.

But devaluation has also made life a lot more expensive for Zaireans and expatriates alike. Not only did food and other prices quintuple practically overnight but it is no longer possible to buy zaires cheaply on the parallel market.

Another major improvement has been the sharp drop in inflation which is expected to be less than 20 percent in 1984, compared with 100 percent last year.

This has been achieved by a sharp cut in government spending: The budget deficit, amounting to 9 percent of gross domestic product in 1982, has been vistually eliminated this year. At the same time, devaluation has caused a liquidity shortage. ''Consumers now need eight times more zaires to buy the same products but the government has not printed extra money,'' a banker pointed out.

The government has tried to soften the squeeze with several measures to liberalize trade and encourage the private sector.

''The government may be forced to overstep spending limits to head off social unrest reflected in recent rumblings in the Army and strikes in the banks,'' one observer said.

Negotiations are also due to start soon with the IMF for a new agreement to replace the current one expiring in March. This would clear the way for Zaire's seventh debt rescheduling in the past nine years: The government is seeking to reschedule nearly one-third of the $900 million repayable in 1985.

A meeting of Western aid donors is due to be organized by the World Bank in Paris in mid-1985 to help finance transport, agriculture, and other priority projects in the country's new five-year development program due to be adopted shortly.

Controls on the prices of food and manufactured goods have been lifted, import licenses are now freely available from commercial banks, and quantitative restrictions abolished.

Small-scale diamond and gold trading has now been legalized, which should lead to a big increase in official export earnings.

While observers in Kinshasa are most impressed by the government's newfound financial discipline, they wonder how long the effort can be maintained.

A major inflow of additional funds is needed to enable the government to move from stabilization to economic rehabilitation and sustained recovery, they say.

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