2024-01-26 17:19:35
It will not be easy for the government to find the necessary means to finance the “economic action” announced by the Head of State. To date, the State’s ways and means budget depends on the external situation which escapes any control of the government. Our main export partner, China, is already experiencing some economic difficulties.
Gaston Mutamba Permission
In his inauguration speech on January 20, 2024, President Félix Antoine Tshisekedi revealed his economic action over the next five years of his mandate. The six strategic axes of his five-year term are: job creation, protection of purchasing power, security of populations, goods and territory, diversification of the economy and strengthening the efficiency of services public. In his speech, the Head of State declared in particular that “These commitments summarize my determination to offer pragmatic solutions through the force of will and the mobilization of everyone’s energies for the creation of more jobs for young people leaving training and for people who are underemployed , controlling the cost of living, and guaranteeing the security of citizens wherever they live. Added to these commitments is the thorny question of opening up our territories…” This is a great initiative for which it will be necessary to determine the qualitative and quantitative data, find funding and finally establish an execution and monitoring schedule. It will take great political will and daily commitment from the government to face the challenges that are hampering the country’s economic recovery, notably corruption and the misappropriation of public funds. According to the constitution, it is the government which actually conducts the nation’s policy which is defined in consultation with the President of the Republic.
The roots of evil
The Congolese economy is still characterized by a structural malformation characterized in particular by the existence of both a structured or modern sector and a significant informal and/or traditional sector. There is also extroversion which makes the country dependent on the outside, the lack of strengthening of the agricultural sector, the basis of the economy, as well as the absence of intra and intersectoral integration and consequently of the entire economy as a whole. This underlying situation brings to the surface well-known cyclical convulsions known as disruptions in fundamental economic balances.
Its process takes place in four sequences: firstly the economy based on the export of a few primary products, mainly mining, with the corollaries the deterioration of the terms of trade unbalances the balance of payments, leads to the insufficiency of currencies on the interbank foreign exchange market as well as the development of speculation and the acceleration of inflation. Secondly, the country’s foreign currency treasury and public finances being dependent on export revenues, the depression of external markets generates the deficit in public finances as well as the drop in the contribution of the exporting sectors, mainly mining. Thirdly, to survive, the State is forced to resort to monetary financing and arrogates a significant share of credit to the economy to the detriment of the productive sectors which contribute to economic growth. Which in turn leads to exchange rate depreciation and inflation. In the fourth and final sequence, the productive sectors can no longer maintain their level of production following the increase in operating costs and in the face of insolvent domestic demand due to the reduction in household purchasing power. This is how the breakdown of fundamental economic balances regularly occurs.
On a social and even political level, the problems are exacerbated by other factors as in all of sub-Saharan Africa: natural calamities (droughts, epidemics), rebellions, civil wars, political instability, demographic growth of an essentially young population, explosion of cities due to rural exodus, destructive pressures on the environment, insufficiency of social infrastructures (health, education, housing) and services: poverty, promiscuity, endemic diseases, unemployment and underemployment. In response, a major adjustment effort must be undertaken on the economic and social level by the government assisted by various external assistance. However, success risks being limited if the effort required does not take the form of a long-term, coherent, coordinated strategy followed step by step. It is necessary for the State to take responsibility and play a central role in this process. The government must carry out development planning as well as formulate appropriate policies and implement them.
What are the prospects for DR Congo?
It will not be easy for the government to find the necessary means to finance the “economic action” announced by the Head of State on January 20. To date, the State’s ways and means budget depends on the external situation which escapes any control of the government. After three years of sustained economic growth despite the COVID-19 pandemic and the war in Ukraine, the coming years portend an unpromising international environment. According to the World Bank, the year 2024 will record the lowest half-decade GDP growth in 30 years (World Economic Outlook) The slowdown in global economic growth will have negative repercussions on exports, tourism, official development assistance and remittances from the diaspora. Commodity prices will experience stagnation. Our main export partner, China, is already experiencing some economic difficulties. If copper prices can remain relatively stable at $8,000 per ton and increase from the end of 2024, this is not the case for cobalt which is trading around $30,000 per ton coming from $95,000. This trend could continue until 2027 due to oversupply. The fall in commodity prices risks clouding the short-term outlook. We must add the war in the Middle East, the floods of December 2023 and January 2024 in certain parts of the country as well as the persistent insecurity.
We must always keep hope
Everyone agrees that the DR Congo can quickly become a regional economic power and an emerging country if it undertakes political reforms and equips itself with effective and efficient management. As we know, it is bad governance which is at the root of all the crises that the country has experienced since its independence in 1960. They have not made it possible to improve the living conditions of the population. Efforts must therefore go into strengthening governance. These are fair access to justice, respect for human rights and the effectiveness of institutions. Attention must be paid to a number of problems which hamper development. First of all, this concerns basic infrastructure (electricity, distribution of drinking water, railways, roads, ports) which must be rehabilitated.
Regarding unemployment, it is above all private companies that create jobs and wealth. In every modern country there are rights and obligations of economic operators. The partnership with the State is based on obligatory interdependence: companies need the State which holds the lever of everything to ensure in particular a stable, sustainable, secure and encouraging economic and social environment. While a State without economic operators is inconceivable. Likewise, economic operators cannot prosper without workers or populations, that is to say, without a labor force or a market. The State must therefore improve the business climate so that companies can prosper and allow them to have access to bank credits to finance their activities. This requires an efficient banking system. Which is not yet the case.
In the same vein, it is inconceivable that the Single Window for Business Creation closed its doors for almost three months, preventing any registration of company documents following the lack of operating costs and fire in its computer server. Small and medium-sized businesses are also of paramount importance. SMEs can contribute significantly to the creation of wealth, the improvement of tax revenues and the reduction of unemployment. Entrepreneurs do not make orders. They achieve it with the strength of their wrist when conditions permit.
Agriculture is another important axis of development and agricultural job creation. National agriculture is slow to be helped and protected against subsidized products from industrialized countries. Imported foods contribute to the disorganization of the agricultural sector. The same goes for food aid!
Gaston Mutamba Permission
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