Congo PM proposes deep budget cuts, warning of hyperinflation

May 17, 2016 6:52 AM

Congo, Africa's leading copper producer, has been hard-hit by the downturn since last year in commodities markets. The oil and mining sectors account for some 98 percent of its export earnings.

Congo PM proposes deep budget cuts, warning of hyperinflation

Democratic Republic of Congo's prime minister proposed cutting operating costs of government ministries and other public services by 30 percent on Monday, warning of a risk of hyperinflation if the government failed to act.

The government announced earlier this month that it would propose a 22 percent reduction to its initial 8.48 trillion Congolese franc ($8.9 billion) budget for the year, largely because of low global metals prices.

Prime Minister Augustin Matata Ponyo presented details of the revised budget to parliament on Monday, which must debate and then vote on the proposal. The plan includes slashing spending on healthcare equipment by over 90 percent.

"If nothing is done, we run the risk of suffering from the hyperinflation that is hitting other countries, and of reliving the nightmare of the 1990s," Matata told lawmakers.

Inflation in autocrat Mobutu Sese Seko's Congo, then known as Zaire, hit an all time high rate of nearly 24,000 percent in 1994, sending the local economy crashing.

The government's most recent inflation projection foresaw a rate of 1.4 percent in 2016.

However, after years of near total exchange rate stability, declining reserves of foreign currency have placed pressure on the franc, causing it to lose more than 2.5 percent of its value against the dollar this year.

Matata also said that Congo would scale back the size of a planned international bond issue to finance infrastructure projects from 653 billion to 256 billion francs.

(951.9 francs = 1 dollar)