World Bank Proposes $100 Mln Crisis Loan To Congo

Congo`s foreign reserves, which stood at over $225 million last April, fell to just $36 million in early February.

The World Bank has proposed lending the Democratic Republic of Congo $100 million in emergency funds from early March to help offset the effects of dwindling mineral export revenues, a Bank official said on Tuesday.

Congo's foreign reserves, which stood at over $225 million last April, fell to just $36 million in early February.

That amounts to less than one day of import cover for a country which has little manufacturing or agricultural capacity and depends heavily upon goods brought in from outside.

"The goal is to help the government confront urgent spending requirements," Marie-Francoise Marie-Nelly, Congo's World Bank country director, told Reuters.

"It's not yet approved, but we will submit the proposal on Feb. 26 ... We hope to begin disbursements in early March," she said.

If approved by senior World Bank officials in Washington, the funds will be earmarked for payment of teachers' salaries as well as the government's water and electricity bills, she said.

The World Bank proposal comes as Congo's government is accelerating efforts to secure another $200 million from the International Monetary Fund's Exogenous Shocks Facility to tide it over as it awaits a rebound in demand for its mineral exports.

Congo's economy has taken a major hit as mining operations in its copper- and cobalt-rich Katanga province have either cut back or abandoned projects due to a slump in commodities markets since mid-2008 and a deepening global economic crisis.

Mining revenues account for around 70 percent of foreign currency revenues and compose around 40 percent of the vast central African nation's $4.9 billion 2009 budget.

In December, however, Congo lowered its 2009 copper exports forecast to 365,000 tonnes, from a pre-crash projection of 410,000 tonnes. Production forecasts for cobalt, which is widely used in electronics, were more than halved to 32,000 tonnes.

The IMF cut the country's 2009 economic growth forecast by more than half to 4.4 percent late last year and lowered its projection for direct foreign investment by over two thirds to $800 million.

Last week, Congo's budget minister said the state was looking into the possibility of cutting planned 2009 spending by more than a quarter. But attempts to combat the drop in reserves have been complicated by the need to prop up Congo's sliding franc currency.

The Central Bank has raised interest rates three times since late December from 28 to 66 percent in an effort to save the franc, which has lost around 20 percent of its value since late last year.

Repeated interventions in support of the struggling currency have depleted reserves even further and raised fears of a return to the kind of situation that saw inflation hit 10,000 percent in 1994 under late dictator Mobutu Sese Seko.