The headline reserve figure is large, but the central bank’s own dollar position is thin and shrinking.

By Kanisa Magazine · March 2021

Congo’s international reserves stood at US$6,368 million on 26 March 2021, enough on paper for just over six months of imports. The part the central bank actually owns, its own foreign-exchange position, was US$503 million, equal to about two weeks of purchases abroad, and it had fallen by nearly half in fifteen months.

Both figures sit in the BCC weekly statistical digest of 31 March. The distance between them is the real shape of Congo’s external account: a big dollar economy whose cushion belongs mostly to someone else.

Two reserve numbers

The broad measure rose 45 per cent since 2019, while the BCC’s own position fell by half.

Broad reserves, which include foreign-currency deposits that commercial banks keep at the BCC, went from US$4,378 million at the end of 2019 to US$6,334 million at the end of 2020 and a peak of US$6,530 million on 29 January. They then eased to US$6,368 million, or 6.04 months of imports. The strict series, built only from the BCC’s own foreign-exchange position, fell from US$1,031 million at the end of 2019 to US$709 million a year later and US$503 million by 26 March, just 0.48 months of imports. In the single week between 12 and 19 March it lost US$96 million.

The headline is large because dollar deposits are large. Banks must hold part of customer dollars with the central bank, and those balances show up in the broad figure. They are liabilities to depositors, not a war chest.

Where the dollars come from

Mining tax receipts supplied US$783 million of the BCC’s 2020 foreign-exchange purchases.

The BCC’s foreign-exchange budget explains the mechanism. When mining companies pay royalties and taxes in dollars, the central bank buys those dollars from the Treasury with francs, which the state needs for payroll. In 2020 these purchases of tax revenue came to US$845 million, of which US$783.5 million came from mining. Oil added US$53.5 million. The line for IMF financing records US$361.5 million, in step with the April 2020 Rapid Credit Facility approval described in the Fund’s press release.

In 2021 the flow continued but the account ran a deficit. January brought US$88.2 million in receipts against US$110.8 million in spending, a gap of US$22.6 million. February brought US$141.0 million against US$114.5 million in spending, with the table still showing a US$26.5 million negative balance. Mining purchases were US$54.2 million in January and US$50.0 million in February. Debt service, foreign suppliers and embassy costs absorb the rest, which is why the strict reserve line sagged even as commodity prices rallied.

The price of the cushion

Copper and cobalt gave the BCC room, but the room is borrowed from the metal markets.

London copper stood at US$8,781 per tonne on 26 March, against US$7,803.50 at the end of 2020 and a peak of US$9,614.50 on 26 February. Cobalt, quoted at US$52,370 per tonne on 26 March against US$32,000 at the end of 2020, was up 64 per cent. The Fund has pressed Kinshasa on transparency in mining contracts as a condition for a new programme, according to Actualite.cd, so the dollars that matter most for 2021 depend on both prices and governance.

A correction in either metal would hit tax receipts first, then the BCC’s strict position, then the exchange rate. The central bank would have less room to meet a sudden demand for dollars from importers.

Reading the account

Judge Congo’s cushion by the strict line, and plan imports around it.

A procurement director or trade lender should anchor on the 0.48 months, not on the six. Because the strict line has already lost half its value in fifteen months, a metals correction would reach importers through rationing before it reached the headline number. Importers should therefore build a supplier dollar buffer now, and lenders should price trade lines assuming that the strict reserve line, not the broad one, decides who gets dollars in a squeeze.