Reserves reached US$5.19 billion even as cobalt slid and the franc kept weakening.

By Kanisa Magazine · August 2023

The Banque Centrale du Congo’s digest of 30 August 2023 shows a Congolese external account that was stronger on the reserve line and weaker on the receipts line. Gross reserves stood at US$5,186 million on 25 August, or 2.59 months of imports, against US$4,349 million at the end of 2022. Yet the commodity prices that normally fund that cushion told a split story.

Copper on the London Metal Exchange closed the week at US$8,367 a tonne, within US$12 of its 30 December level. Cobalt cathode was quoted at US$35,717 a tonne, 36 per cent below the US$56,026 of the same date. The reserve build therefore did not come from a broad commodity windfall, and a business reading Congo’s balance of payments should separate four forces: price, volume, imports and financing.

Price: one metal held, one gave way

Copper finished August level with its end-2022 price; cobalt finished it a third lower.

The BCC’s commodity table traces the divergence. Copper peaked at US$9,087 on 31 January, dipped to US$8,016 on 31 May and recovered through the summer. Cobalt fell in steps, to US$34,172 by 31 March and US$28,839 on 30 June, before a late-August bounce. Brent, which sets the fuel import bill, sat at US$84.15 against US$86.00 in December, so oil was neutral rather than a cost shock.

Volume: the Copperbelt carries the receipts

Annualised copper output ran about 11 per cent above 2022, while cobalt output ran about a fifth below it.

The same digest records 1,326,109 tonnes of copper produced in the first half of 2023, against 2,394,630 tonnes for the whole of 2022. Doubling the half-year gives roughly 2.65 million tonnes. The BCC’s July index stood at 291.2 on its 2015 base, up from 278.9 a year earlier. The Ministry of Mines figures reported by Copperbelt Katanga Mining put first-quarter copper at 595,143 tonnes, of which 555,218 tonnes were exported.

Cobalt moved the other way. The BCC’s provisional series shows 44,912 tonnes in the half-year, a pace near 90,000 tonnes against 115,371 tonnes in 2022. Lower price and lower recorded volume compound each other, which is why cobalt-linked receipts shrank faster than the copper line grew.

Imports and the franc

A weaker franc raises the local-currency cost of imports without adding a dollar to export receipts.

The official indicative rate moved from 2,016.57 francs per dollar on 30 December to 2,465.66 on 25 August. For importers of fuel, flour and machinery, that is a 22 per cent rise in the franc price of each dollar of goods. A commentary in Deskeco attributes the pressure to weaker terms of trade, with petroleum and grain dearer while copper and cobalt cheapened. The BCC’s own tables show the domestic result: cumulative price growth of 21.6 per cent for the year to the fourth week of August.

Financing: where the cushion came from

Roughly US$840 million of reserve growth since December owes more to official money and central-bank action than to export prices.

The arithmetic is plain: US$5,186 million less US$4,349 million is US$837 million. The IMF Executive Board’s fourth review of the Extended Credit Facility released about US$203 million on 28 June for reserve support, roughly a quarter of the build. The BCC then raised its policy rate from 11 per cent to 25 per cent at an extraordinary committee meeting on 8 August, a decision Radio Okapi reported the next day, to neutralise excess liquidity and support the currency.

The BCC’s note on the series says reserves are drawn exclusively from its own foreign-exchange position, which means every dollar sold to defend the franc comes straight off the number.

What the checkpoint asks of a treasurer

Price copper-linked dollar inflows as the dependable line and treat cobalt revenue as a variable.

Companies that earn in dollars from copper, or sell to the mines, hold the steadier side of this account. Those whose revenue tracks cobalt should budget on prices near US$33,000, the level the BCC’s London quotation held for most of the summer, rather than on 2022’s peak, because the BCC’s own tables show no sign of a rebound in volumes to offset the price. Importers should assume the 2.59 months of cover is financed by programme money and policy tightening, and fix their dollar purchases for the fourth quarter before the next weekly digest arrives. Suppliers invoicing in francs should write a rate review clause into every quarterly contract.