The reserve line rose in one step while the dollar purchases behind it narrowed.

By Kanisa Magazine · April 2022

Congo’s international reserves stood at US$2,960.4 million on 22 April 2022, 2.58 months of imports, up US$221 million from US$2,739.3 million at the end of March, according to the Banque Centrale du Congo’s digest of 27 April. Over the same weeks, copper on the LME slipped 1.7 per cent to US$10,210 a tonne. The increase therefore did not come from the headline mining price.

Nearly all of it arrived in one session. The reserve line read US$2,734.5 million on 15 April and US$2,945.0 million on 18 April, a rise of US$210.5 million between two business days. The digest does not say what produced it, and that is the first thing a reader of an external account should note about April.

What the reserve line did

Reserves were flat for two weeks, then moved in a single step.

From 31 March to 15 April reserves drifted down, from US$2,739.3 million to US$2,734.5 million, with the cover steady at about 2.38 months. After 18 April the line settled between US$2,931.8 million and US$2,961.5 million, and cover rose to 2.55-2.58 months. At the end of February the line had stood at US$2,827.9 million and at the end of 2021 at US$2,751.3 million, so the April level is the highest in the digest’s 2022 columns. Cover was 2.61 months at the end of 2021.

The Monetary Policy Committee, summarised by DeskEco, had put cover at 2.4 months at the end of March, which matches the digest.

The flows underneath

Mining purchases covered auction sales 3.5 times in March and only 1.2 times in April so far.

The BCC’s foreign-exchange account buys dollars from mining revenue and sells them to banks. In March it purchased US$246.0 million of mining revenue, more than twice February’s US$109.5 million, and sold US$71.0 million at interbank auctions. In the first 22 days of April it purchased US$107.3 million and sold US$89.5 million. The ratio of purchases to sales, the nearest thing the digest offers to a flow measure of the external balance, fell from 3.5 to 1.2.

A reserve line that rises while the underlying surplus narrows is being fed from somewhere else: an official inflow, a financing disbursement or an accounting change. The digest’s foreign-exchange table shows no corresponding entry in the mining line, so the explanation has to be found outside it.

The prices that set the import bill

Brent has risen a third since December and cobalt is holding, which helps exports and strains imports in equal measure.

The BCC’s table of commodity quotations shows Brent at US$107.01 a barrel on 21 April against US$78.36 on 31 December, a gain of 37 per cent, and WTI at US$103.79. Copper moved from US$9,710 to US$10,210 over the same four months. Zinc rose to US$4,509 a tonne. Cobalt on the LME stayed at about US$81,800 a tonne, and London cathode held at US$38.25 a pound. Congo is a crude producer on a small scale, 7.7 million barrels in 2021, and a net importer of refined fuel, so Brent at that level lifts the cost of the diesel that runs the mines and the generators that run everything else.

The commodity profile the BCC tracks in its raw materials series is therefore double-edged: a flat copper price against a rising fuel import bill.

What a business should do with the reading

Treat the April rise as a one-off until its source is named, and watch the purchase-to-sales ratio.

A cushion of 2.58 months is better than 2.39, and it is useful for sentiment. It is not yet evidence of a stronger external balance. Importers and mining contractors should hold their contingency plans for the franc until the BCC explains the 18 April step, or until the purchase-to-sales ratio recovers above two. A company that contracts diesel or imported inputs in dollars should assume that a fuel price near US$107 a barrel stays in the budget for the next quarter.