Canceling a country's debt is a thorny issue when that country is Congo
Almost $20 billion of the Democratic Republic of the Congo's debt has been cancelled. While that is good for its economic progress, some decry the help because of Congo's human rights record.
Several days ago, the Paris Club of lenders announced that it would cancel all of the debts the Congolese government owed them – $7.35 billion. This follows the cancellation of $12 billion in debts by the IMF in July. Altogether, these cancellations have freed up around $520 million in the Congolese annual budget that had been used for debt servicing, almost 10 percent of the current budget.Skip to next paragraph
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Debt cancellation is a thorny issue. It's incredibly difficult to oppose the cancellation of the odious debt that had mostly been accumulated under Mobutu –why should the current government pay for the sins of a past dictator? It shouldn't.
On the other hand, if there is leverage to be had on the Congolese government, it is probably to be found here. The World Bank, the IMF and the African Development Bank account for a large majority of the financial support provided to the Congolese government, which makes up half of the country's budget. There is a deep ingrained reluctance within the bureaucracies of these organizations to use grants and loans to leverage security sector reforms, decentralization or to tackle impunity. There was some pressure, especially from the Canadian government, earlier this year to use the $12 billion IMF debt relief package to push for governance reforms, although this was somewhat cynically tied to the squabble over First Quantum (a Canadian mining company) mining rights (was this really this most shocking issue to be confronting Kinshasa over?) In the end, however, donors decided that the the criteria had been met under the Highly Indebted Poor Country (HIPC) initiative and that debt relief should be granted. Critics complained that the HIPC criteria were very narrow and looked mostly at financial matters – inflation rates, reforms in the financial regulations and procedures, fiscal performance, etc. – to the exclusion of political and human rights concerns.
Which it why it wasn't surprising to have some heavyweights again balk over granting the $7 billion Paris Club debt relief. Charles Michel, the Belgian minister for development, had said that debt relief should be postponed until next year due to poor economic governance. In the end, however, apparently, other considerations won over and relief was granted.
Which leaves two questions:
Why don't donors, who constantly wring their hands and complain about their lack of leverage to push for reforms in Kinshasa, use their financial weight in the World Bank and IMF as leverage? Perhaps debt relief is not the right forum, but what about all the other loans?
When leverage is considered, why is it almost only over "economic governance," in other words when Kinshasa begins canceling mining contracts and refused to improve the investment climate?