National prices were 8.4 per cent above December, 87 per cent of the year’s official forecast.

By Kanisa Magazine · April 2023

By the week to 23 April, Congolese consumer prices were 8.4 per cent above their December level, which is 87 per cent of the 9.7 per cent the central bank had forecast for the whole of 2023 when it met in March. Year-on-year inflation had risen to 18.5 per cent nationally and 24.2 per cent in Kinshasa, up from 16.7 and 21.5 per cent four weeks earlier.

The most useful detail in the BCC digest of 26 April is the direction of the weekly numbers. They climbed through March and the first half of April, then eased in the week the franc stepped down. Prices were moving faster than the exchange rate.

The weekly rhythm

Price growth peaked in the week of 3 to 9 April and cooled afterwards, which matters more than the cumulative total.

The national index rose 0.509 per cent in the week to 26 March, 0.593 per cent the next week, 0.615 per cent in the week to 9 April, 0.575 per cent the week after, and 0.479 per cent in the week to 23 April. At the last reading the BCC’s annualised projection of the year’s rise was 30.1 per cent, up from 28.8 per cent in the March digest.

Kinshasa moved faster and more unevenly: 0.840, 0.890, 0.924, 0.770 and 0.789 per cent. The capital has gained 11.9 per cent since January, with an annualised figure of 44.3 per cent. Lubumbashi has gained 10.3 per cent and sits at 25.2 per cent on the year.

What rose most

Cassava and tubers, medicines and mobile services outpaced the average.

In the national basket, the line for potatoes, cassava, other tubers and bananas rose from 222.999 to 243.983 over the four weeks, a gain of 9.4 per cent. Food and non-alcoholic drinks overall rose 2.7 per cent, edible oils and fats 2.7 per cent, communications 3.0 per cent, health 2.3 per cent and transport 1.4 per cent.

In Kinshasa, the health index jumped 4.4 per cent in four weeks, from 271.480 to 283.553, and food rose 3.8 per cent. Lines like these are hard for a household to postpone. Medicine, staples and phone credit are bought every week, which is why they weigh on perception and wage demands faster than their share of the basket suggests.

Imported and local pressure together

The IMF flagged imported food and fuel costs in December, and the April figures show they have not gone away.

The IMF Executive Board said in its December 2022 decision that inflation was expected to exceed 12 per cent by the end of 2022 on higher global food and fuel prices, worsened by the war in Ukraine and supply bottlenecks. The BCC’s weekly reading at the end of December was 13.1 per cent. Four months later it was 18.5 per cent.

Part of that is local, because tubers are a domestic crop. Part is imported, because flour, oils and fuel depend on dollar prices and shipping. The weekly slowdown in the week of the franc’s 3.3 per cent one-day move suggests that the exchange-rate effect had not yet reached shelf prices, and the local part was driving most of the drift.

What the monetary committee said

A 9 per cent policy rate cannot cool a market that grows 18 per cent a year.

The BCC’s 22 March decision raised the policy rate by 0.75 of a point to 9 per cent, with the committee citing high internal and external risks. The BCC’s real policy rate, its own measure of the gap with inflation, was about minus 7 per cent in the April tables.

The mechanism is direct. A policy rate below inflation makes it cheap to hold goods and expensive to hold francs, so traders and households convert francs to stock or dollars, and the inflation the central bank is trying to stop feeds itself.

What this means for a business

Assume 25 to 30 per cent annual price drift in the cities, and index every multi-month contract.

A supplier signing a six-month price in Kinshasa on the figure the BCC forecast in March would be underwater within weeks. A planning assumption near the annualised 30 per cent national figure, or 44 per cent for Kinshasa, is more prudent than 9.7 per cent.

Index wages and supplier contracts to the BCC’s weekly series on a named date. Buy staples forward where storage is cheap, and add a monthly price-review clause to any contract that runs past the second quarter.