Wednesday, August 12, 2009

Congo closer to debt relief

The World Bank says they are close to granting debt relief to the Democratic Republic of Congo. The Bank hopes to grant the relief next spring, but is waiting on negotiations between Congo and China to complete.

The World Bank wants Congo to change a minerals for infrastructure deal with China before giving the debt relief. However, changing the deal could cancel 3 billion dollars of infrastructure improvements to Congo.

From this Reuters article, writer Lesley Wroughton explains this give and take that Congo has to do.

The relief would cover some $7 billion of non-commercial loans from the IMF, World Bank and bilateral debt held bilaterally with governments. The savings to Congo would amount to $400 million a year in payments.

Zoellick said there had been progress in talks between Congo and China on amending a $9 billion infrastructure-for-minerals deal, components of which have held up the debt relief accord.

The International Monetary Fund fears the contract, which uses Congo's mineral reserves as a guarantee for infrastructure projects, could plunge the central African nation deeper into debt and has delayed forgiveness of most of the $10 billion Congo already owes.

A mission from the IMF is currently in Congo.

Agreed early last year, the contract with China is a cornerstone of Kabila's post-conflict reconstruction policy following decades of dictatorship and a 1998-2003 war that left the former Belgian colony's infrastructure in ruins.

The deal is comprised of two phases of infrastructure projects with a total price tag of $6 billion aimed at rehabilitating thousands of kilometres of road and rail connections and constructing schools and hospitals.

An additional $3 billion is slotted toward developing new Chinese copper and cobalt mines in Congo's mineral-rich Katanga province, where reserves will serve to pay back the costs of those projects.

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